THE Competition and Consumer Commission of Singapore (CCCS) has invited public feedback on ANA Holdings’ proposed acquisition of Japanese cargo airline Nippon Cargo Airlines (NCA).

CCCS said in a statement on Friday (Dec 15) that it had accepted a Dec 7 application by ANA and NCA. The public consultation will close at 5 pm on Jan 2, 2024.

The competition watchdog is seeking views on whether the acquisition will contravene section 54 of the Competition Act 2004, which prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore.

In Singapore, ANA – Japan’s biggest airline – provides both international air passenger transport and air cargo transport to and from Singapore.

The business activity that is relevant to the proposed acquisition is its operations in international air cargo transport. ANA uses dedicated cargo planes, or freighters, as well as passenger planes, to transport cargo.

Meanwhile, NCA is a wholly owned subsidiary of Japanese logistics company Nippon Yusen Kabushiki Kaisha and is Japan’s sole cargo-only airline company. It provides international cargo transport, including services such as air freighting and handling services for a diverse range of cargo types.

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In Singapore, NCA provides air cargo transport through the use of freighters on international flight routes to and from Singapore.

The two parties submitted that they overlap in the provision of international air cargo transport. Both airline operators provide air cargo transport services to “forwarders” – companies which provide logistics services for senders and recipients of air cargo, but do not carry out the actual air transport of the cargo.

They consider the relevant market to be the supply of international air cargo transport on the Singapore-to-Japan and Japan-to-Singapore routes.

The two parties argued that the proposed acquisition will not result in a substantial lessening of competition in these markets for seven reasons.

First, substitutes are available within international air cargo transport, they said. This is because the combination of different routes between different cities – be it direct or indirect flight routes – can satisfy the same or similar demands for air cargo transportation between Singapore and Japan.

Second, there is strong competition among all airlines in the international air cargo transport market. This includes other “combination airlines” – those that utilise both freighters and passenger aircraft for the transport of cargo – and “integrator airlines” that offer air cargo transportation services to other forwarders.

Third, the international air cargo business is a largely commoditised business, they said. Therefore, competition occurs among all airlines in three primary areas – pricing, network flexibility (destination times), and services.

Fourth, there are “no significant or insurmountable barriers to entry” for the supply of international air cargo transport for the markets specified.

Fifth, ANA and NCA argued that forwarders can easily switch between airlines with little cost and time required. Air cargo transport contracts are normally of a short duration and do not contain exclusivity clauses, allowing customers to switch easily.

Sixth, it is unlikely that coordination between market players in the supply of international air cargo transport for the relevant markets will arise. This is because the large number of potential global competitors who are able to – and currently do not supply – cargo services to and from Singapore would be able to disrupt any coordinated behaviour among existing competitors.

Lastly, ANA has some freight-forwarding capabilities; it and NCA can collectively offer some related services, such as warehousing. But they argued that this “limited vertical integration” would not enable the merged entity to foreclose existing or potential competitors from the air cargo transport market, or restrict the freight forwarding or warehousing options available to buyers.