Winning loyalties

The forging of relationships between airlines and freight forwarders is becoming even more of a necessity in today's fast-moving air cargo industry.
ANALYSIS

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As competition in the thriving world of air cargo grows, global companies are increasingly recognising the need to develop partnerships amongst themselves in order to ensure their share of this lucrative market. By focusing on customer loyalty, airlines and freight forwarders in particular, can find that such programmes help to further consolidate their leading positions within the industry.

The benefits of acquiring such partnerships can be immense. As well as guaranteeing a more stable flow of business, better relationships with existing customers tend to be much more cost-effective and less risky than acquiring new ones.

 

You have to have a strategic objective and be on the same page before moving forward with any such alliance - Safwan Tannir

Furthermore, through better understanding of each other's needs, long-term relations can deliver more efficient streamlined services - resulting in a win-win situation for all those involved. With airlines depending heavily on forwarders for a significant portion of their cargo volumes, it's not surprising that they are keen to attain customer loyalty from such valuable counterparts.

The reason behind such alliances is largely the result of strengthening partnerships formed to ensure the
creation of better efficiencies in the supply chain and uninterrupted flow and distribution capability," explains Ram Menen, Emirates' divisional senior vice president cargo.

Emirates Skycargo prides itself on building long-term partnerships with its freight forwarders based on mutual trust and cooperation. "Forwarders are currently transitioning from traditional freight forwarding to supply chain management and we provide the supply lines within the supply chain," Menen continues. "This helps to create a very close relationship with the freight forwarding industry. Whether they are multinational or local companies, they provide critical end to end services.
 

Menen believes that such partnerships are of positive benefit to the growth of the air cargo market in general, as well as for all parties involved. "The main benefit is having the right growth capacity in the right market. Airlines are able to invest in making growth capacity available in evolving trade lanes, while forwarders and shippers are better able to plan flows within their supply chain," he says.

Whilst Emirates SkyCargo has several such alliances in existence already due to its global partnership programme, Menen highlights that the key to finding a successful partnership lies in aligning business philosophies and well-established reputations.

"Our core competencies lie in creating global distribution networks and managing highly capital intensive, largely perishable assets and capacity. We will continue to concentrate on these aspects and believe in letting experts do expert things while developing overall process management capability," he adds.

Like Emirates Skycargo, Gulf Air Cargo has also been looking to extend its partnerships with the major freight forwarders. It recently launched its Global Incentive Agreement Programme - providing a number of incentives to forwarders to transport airfreight through the carrier, and in return helping to boost its own cargo volumes by being placed on the global forwarder's core carrier list.

As the first member of the Gulf Air's programme, DHL Express has been assigned a key account manager and provided with specific service level commitments from the carrier, including preferential access to the airline's considerable network.

DHL's partnership with Gulf Air is one of the strategic alliances with major regional and global airlines with whom it has similar agreements," explains Bachi Spiga, head of operations, DHL Middle East.

The agreement further increases DHL's worldwide coverage and leverages the strength of both companies," he adds.

With the company having established its operations in Bahrain 30 years ago, the agreement is of particular importance. As stated, "Gulf Air has reorganised its operational structure to a primary hub in Bahrain, with an increase in the frequency of their flights, and DHL is looking to maximise usage of these flights." And of course, as Spiga point outs, the partnership also means faster deliveries for DHL's customers, with the preferential access to Gulf Air flights allowing the latest lodgement of shipments at the origin airport and the earliest recovery time possible at the destination.

This agreement is not the first for the forward-planning express operator, having similar agreements in place with Etihad Airways and Qatar Airways in the Middle East, and alliances with carriers such as Lufthansa in Europe and Air Hong Kong in Asia Pacific. "The partnership agreements with carriers are mutually beneficial as they provide access to permanent books, direct booking, and regular interface with HDQ key account managers, specific service level commitments and service recovery plans including claims processing," says Spiga.

Given our position as the leading express and logistics provider, we are growing fast and will continue to invest and cooperate with key players to strengthen our position as the market leader." Like Menen, he also perceives airline/forwarder partnerships to be on the increase. "Loyalty, incentives and joint development between cargo carriers and freight forwarders will be seen more and more in the future, helping to grow and enhance the air industry as a whole." With DHL Express now well on-board as the first member of its Global Incentive Agreement Programme, Gulf Air Cargo is looking to approach other partners such as DHL Global Forwarding and Aramex to join its ranks.

Aramex itself has also been viewing the mutual benefits of pairing up favourably for some time now. "We review potential opportunities on an ongoing basis and have a number of current alliances with key regional and international airlines in place at any given point in time," confirms Safwan Tannir, chief cargo officer for Aramex. In fact, the company was recently acknowledged by Emirates Skycargo as one of its key partners - swooping up awards for Top Cargo Agent for 2005/2006 and Top Courier Company for 2005/2006 at the airline's annual awards.

As a founder member of the global network, World Freight Alliance (WFA), Aramex is well versed in the benefits of strategic alliances for the freight forwarding world. WFA is represented by some of the biggest companies in the forwarding and logistics industry, providing a range of air, ground and ocean freight services as well as logistics, warehousing and customs brokerage. Recently, the network hosted its annual general meeting in the UAE where one of the major subjects discussed involved the need for greater cooperation with the airlines in the industry.
 

Due to the nature of the industry, and to the increasing competition in it, you will most likely see more such partnerships forming up and taking hold, if only to provide customers with a complete product and service offering in the marketplace," Tannir emphasises.

However, as he is quick to warn, such partnerships do not simply spring up without any strategic pre-planning. "It is important not to rush into partnerships," he points out. "You have to have a strategic objective and be on the same page before moving forward with any such alliance.

Echoing Menen's standpoint earlier, Tannir believes that 'finding the right' fit is an essential component of any partnership in order for it to be of mutual benefit to all the parties involved. "It is important that both parties, the forwarder and the chosen airline, complement each other as they both fall under the same supply chain umbrella where one partner looks for uplift guarantees and the other looks to commitments to meet space requirements and fill the aircrafts on a systematic basis," he says.

With partnerships between the major freight carriers and major freight forwarders gaining strength, some airlines have been additionally recognising the need to win the loyalties of the smaller forwarding companies. In light of the growth of airline networks to include more diversified destinations, smaller forwarders may even in some cases have the edge over the larger companies in terms of local expertise and knowledge.

BA World Cargo, for example, announced the launch of its new customer loyalty programme, LIFT, just earlier this year. Not just the forte of the big forwarders, under this reward scheme members can earn 'points' for every consignment booked, which can be redeemed for British Airways passenger flights to anywhere on the carrier's extensive global network or hotel vouchers. According to the carrier, 450 customers have already signed up to the programme and it has been well received by freight forwarders.
 

"We have recognised our larger forwarder customers for many years through our highly successful 'one+one' loyalty programme. LIFT has been developed to recognise and reward the loyalty of customers that sit outside this bracket," explains Baba Devani, VP sales and marketing, BA World Cargo. "We are the first carrier to implement this type of loyalty scheme globally as we believe in the importance of recognising not only forwarders in our home market, but also those that play a vital role in our business across our global network of 200 destinations in over 80 countries.

Devani asserts that building such strong customer and loyalty programmes are a great way of maintaining long term relationships. "In an increasingly competitive marketplace, these reward programmes build on our existing strong, competitive customer proposition and generate more return business," he says. Whilst the carrier is also looking to refresh its 'one+one' partner programmes with the larger multinational companies, building loyalty towards smaller operators can only help to further boost its reputation as well as cargo volumes.

With the air cargo industry undergoing considerable regulative change recently, impacting on both airlines and forwarders equally, the need for better co-operation between the two sectors has never been greater. "Since 9-11, airfreight forwarders have had to face a growing web of complex security regulations, rising carrier applied surcharges, calls for better utilisation of technology and sensitivity to environmental concerns," points out William Gottlieb, president of FIATA (International Federation of Freight Forwarders Associations). These challenges have led to the association working more closely with IATA on issues such as the e-freight initiative, the forwarder/airline regional and national partnership programmes and security.

With better partnerships between airlines and forwarders clearly meaning better co-operation and co-ordination of the air cargo industry as a whole, encouraging loyalties can only lead to increased efficiency and improvements to airfreight services. As many carriers and forwarders will be quick to point out, alliances are increasingly being recognised as a win-win situation for the airfreight industry overall.

 

Other Examples of Loyalty Programmes

South African Airways Cargo - Frequent Freighter

SAA Cargo's vision is to be a choice provider of transport solutions in Southern Africa, providing a superior, specialised mail and air cargo service through partnerships with its clients globally. As part of this, the carrier has a recently revamped customer loyalty programme named 'Frequent Freighter', which rewards freight forwarders with air miles for shipping their cargo on the services of South African Airways Cargo.Tiered membership status of blue, silver, gold and platinum is available, based on the support given to the airline for a period of 18 months.

Gulf Air's Global Incentive Agreement Programme

As part of Gulf Air's initiative, once a company finalises its membership, it receives incremental incentives by route group to perform over and above last year's production. This benefits Gulf Air, because higher incentives are provided on directionally weak sectors, allowing the airline to prosper from increased cargo volumes, while the global partner benefits through higher levels of commission.

Lufthansa Cargo's Global Partnership Programme

The aim of the programme is to allow partners to grow together in the market, harness synergy effects, reduce transaction costs and spur progress on major industry issues such as automation of business processes. By entering into the Global Partnership Programme, new members
of the scheme will benefit from reliance on Lufthansa Cargo's dedicated customer support team. The programme has eleven globally active forwarders signed up, with Expeditors as its newest member.
 

 

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