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SIA/LH/SK Cargo Alliance Mulls New Partner

Wed Feb 06, 2002 1:25 am

EXCLUSIVE: SIA/Alliance -2: Several Possible Partners
Lufthansa, SIA, SAS Alliance Mulls New Partner - Sources
(MORE) Dow Jones Newswires 05-02-02

By Shen Hong

SINGAPORE (Dow Jones)--An alliance between the cargo units of Singapore Airlines (Singapore: SIAL.SI - news) Ltd. (P.SAL), Lufthansa AG (G.LHA) and Scandinavian airline SAS AB (S.SAI), is considering adding another partner to bolster its presence on the north Asia to U.S. routes, industry sources told Dow Jones Newswires Tuesday.

New Global Cargo, formed in April 2000, pools the resources of the three air cargo carriers through network sharing.

By adding a partner, the alliance will be able to challenge the dominance of Hong Kong's Cathay Pacific Airways Ltd. (H.CPA), Northwest Airlines Corp. (NWAC), United Airlines (UAL) and Japan Airlines Co. (JAPNY) on the north Asia-U.S. routes.

Analysts say Continental Airlines Inc. (CAL), Air China, Taiwan's China Airlines Ltd. (Q.CAI) and EVA Airways Corp. (Q.EAW), South Korea's Asiana Airlines (Q.ASA) could be possible partners.

A spokesman for SIA's wholly-owned unit, SIA Cargo, declined to confirm or deny the news, but said in a statement: "The main consideration for the expansion of our network is complementary strength."

"That is a carrier with sizable freighter operations and extensive wider bellyhold capacity through a passenger airline, on routes that add to New Global Cargo's existing strengths."

The alliance partners operate a network spread over 103 countries and which has access to 31 all-freight aircraft and 612 passenger aircraft.

While the alliance adequately services customers in Europe, Australia and some parts of Asia, the north Asia to U.S. route is a gaping hole in its global network.

Analysts say the pursuit of a new partner covering North Asia and the U.S. could be a difficult task.

The formation of such an alliance isn't necessarily a cost-saving move, but it can be a marketing strategy to promote an operator's brand and service among its partners' customers, airline executives and analysts say.

New Global Cargo began offering joint express shipment service for the three carriers' customers in October 2001.

The service allows customers to book express shipments through the reservations center of any of the three airlines.

In addition to this service, the alliance is expected to start providing joint services for general cargo shipment in spring this year.

The three airlines also hope that a successful alliance will help revive earnings and air traffic.

Singapore Airlines, with the bulk of its cargo business dependent on Singapore's weakening electronics exports, may report its first ever loss because of lower passenger and cargo traffic. SIA's cargo traffic declined for 14 of the last 15 months.

Freight volumes of Lufthansa Cargo, the world's leading air cargo operator, also slumped 8.1% in 2001 to 1.7 million metric tons.

Analysts and industry executives say they don't expect a recovery in air cargo demand until the second half of this year when the global economy is expected to pick up.
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