Jun 20, 2016

ANA/UAL to develop business as a virtual company

Toshiaki Toyama, Cargo Marketing and Services, President of ANA Cargo

Jan Krems, President of United Cargo

All Nippon Airways (ANA) and United Airlines (UAL) will initiate a joint venture (JV) on the Pacific Ocean routes in stages, beginning with the inception in July 5, 2016 of mutual sales of service from Japan bound for North America. Toshiaki Toyama, Cargo Marketing and Services, President of ANA Cargo, and Jan Krems, President of United Cargo, have held a press conference, explaining thoughts and expectation about the JV's beginning and future activities. Toyama spoke his mind about the JV, saying, "This is what is called 'business integration'. The two companies' combined 25 weekly Japan-North America flights will be integrated as a virtual company." He pointed out the direction in which the companies intend to start such a JV also on the Asia-South America routes in future. Krems, referring to the severity of market environment, said, "We will seek to differentiate ourselves from competitors by proceeding with the JV beyond a business paradigm to build an overwhelming network. This will be expected to generate effect more than a simple summation."
The gist of interview between press corps and them is as follows:

——First of all, would you outline the JV?

Toyama: After many years of preparation, we are to inaugurate on July 5 a JV of the cargo sector with UAL, beginning by the Japan-North America route. Explaining briefly about the JV, it is what is called "business integration". Namely, the cargo business in Japan and North America of UAL's and ours will be integrated. On the routes intended in the JV, currently operated are a combined total of 25 weekly flights (15 by ANA and 10 by UAL). The flights are to be integrated under a virtual company. The point is that we will be able to provide a wide range of services to the customers of the two companies. Starting with ex-Japan service at first, we plan to also initiate ex-North America one early next year as soon as it is ready. Although it is not yet in sight due to the adjustment and negotiation with the countries related to the service, we intend to expand the service to Asia and South America in future.

Thanks to the inception of the JV, it will be possible for UAL's customers to utilize, for example, the San Jose and Seattle flights currently operated only by ANA out of the two companies. On the contrary, our customers will be able to utilize the flights operated only by UAL at present. Or, regarding flights operated by both ANA and UAL such as Los Angeles and San Francisco ones, we will also offer choices in tune with the needs, since such flights are operated in different time zones.

On the front of quality, we will pursue one-stop service, making an attempt to consolidate the warehouses under the concept of "move under one roof". We have already started shared usage of warehouses at Haneda, Kansai, Chicago, Honolulu and Houston.

We have a lot of ideas. For example, we have a mind to collaboratively develop special handling services. Although the market environment is harsh, the Japan-North America service is our mainstream. We take aim at beefing up competitiveness as a business operator, while enhancing the convenience for customers.

——What will be materialized by the JV?

Toyama: We are able to ensure a staggeringly many routes and flights between Japan and the U.S., a line which can be said to be "a main artery for air cargo" with its large-scale trade. It is a predominant attraction by the JV that we are able to offer such a service as one company. The point in common about the Japan-U.S. market is that multiple hub airports in the two countries have a function of gateways (to other countries and areas). Los Angeles Airport is a good example. We will be able to evolve its function further, and sell carriage of cargo, for instance, bound for Iwakuni, Fukuoka and Okinawa as our own flight.

Krems: That is right. We will be able to structure a great network with which no other airline companies can catch up, by initiating a JV with ANA beyond a framework of business by one company to be seamlessly integrated. While a long drawn recession in the world market persisted, we were compelled to do cargo business carefully, and so sought for an optimal solution. We also considered differentiating ourselves from competitors by setting up a JV beyond the existing state of business to build an overwhelming network.

The effect from the unified network is great. UAL operates more than 4,000 flights a day within the U.S., while ANA provides outstandingly numerous routes and flights. When these routes are combined, we can supply seamless haulage service from all over Japan to various points in the U.S. It leads to a benefit for customers to do business and offer service as one company. The benefit is greater than when the two companies are separately involved in the business. Under the concept of "under one roof", the customers of the two companies are to unload and receive cargo at the same warehouses, regardless of which airline they choose. As the windows for the two companies are unified, "one-stop shopping" will be enabled for customers. These factors are the JV's significant visible advantages. We can expect effect more than a simple summation.

——Why did you decide to set up the JV?

Toyama: We were attracted most by the routes operated by UAL and thought that it was easier for us to generate synergy with it on consideration of the mutual configurations of routes. Taking account of the future potential, if we can combine our Asian routes with UAL's ones in North America and Latin America, the effects will be really something in terms of cargo marketing per se. It is also agreeable that we can easily cooperate in human resources. ANA and UAL have already inaugurated a JV in the passenger service in which we share the same goals, collaborate, and highly evaluate each other. These affinitive experiences also have given us the push. As there were many reasons for the choice, it eventually became a decisive factor that ANA and UAL had a chemistry and got a good rapport with each other.

Krems: First of all, we thought that UAL and ANA had, in a sense, a common culture and spirituality so as to build a relationship to complement each other in terms both of organization and networks. The viewpoints are also in common. The most important point is that we can trust each another. From my past experience, this trustful relationship is the most important factor to realize a JV and lead it to success.

From here on, UAL will deepen the relationship with ANA. Organizationally, we will go ahead with the integration by sharing working groups and strengthening the collaboration with ANA at a level of each employee to work together closely, and attempt even to have differences between the two companies in common in order to advance to the next phase.

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