17 January 2024 (Lloyd's List) - RESILIENCE and reliability are the keystones of the new co-operation agreement between Maersk and Hapag-Lloyd that will launch in February 2025.

Speaking in a press conference following the announcement, Maersk executive vice-president and chief ocean product officer Johan Sigsgaard said Maersk believed it needed a different solution to pursue its strategy when it announced last year that it was to dissolve its 2M partnership with Mediterranean Shipping Co.

"We felt we simply did not have the control over the way the network was constructed, and in the design and execution to get to the reliability level we wanted," he said.

"The second goal was to create a network that was even more strongly connected to our inland operations, specifically at some of the central hubs we have built in the network."

Maersk had been in discussions with several partners over how to achieve its network goals since then, but it had become clear that Hapag-Lloyd shared the same ambitions, he said.

"The two of us have strong beliefs around lifting the quality levels," Sigsgaard said. "It is also true on sustainability. We also have a complementary asset base when it comes to ships and terminals."

That had made it possible to put together a "very extensive" network covering the two companies' important markets on the east-west axis.

But where it differed from previous arrangements was on the commitment to quality.

"We have been working on a network that can give above 90% reliability," Sigsgaard said. "This is a breakthrough as reliability has been hovering around 70% with quite some variability on disrupted years."

During the pandemic schedule reliability reduced to as little as 30% and has only recovered to a peak of 70% in recent months.

Speaking at a separate event, Hapag-Lloyd chief executive Rolf Habben Jansen said Hapag-Lloyd also needed to make changes to improve reliability.

"Over the course of last year, I think it became very clear that if we want to become the undisputed number one for quality, then we have to deliver better operational quality than what we are doing today," he said.

"And with the partners that we have today, we have made insufficient progress during the past five years to get there."

To achieve this goal, the two lines are creating a new style of network.

"Loops will be leaner with fewer stops, which is the first part of the solution," Sigsgaard said. "The more calls you have the less reliability you have.

"The second point is how this is structured around committing to reliability. We have an execution set up that can deliver, including a contractual commitment to quality."

A typical alliance agreement would have a statement of ambition, he said, but if it was not met there was no consequence.

"This agreement has financial and contractual consequences," he said.

A higher concentration of volumes would be served by the two carriers' owned hub terminals.

"This allows us to connect to the inland network and connect the ocean loops at times when things get difficult," Sigsgaard said.

Habben Jansen believes the new network structure will work to improve reliability.

"We believe that the 90% is doable," he said.

"That has a little bit to do with the fact that that we will have a slightly different operating model with fewer ports on both ends than most of the traditional co-operations have, and a stronger role for the hubs of which we have control. We believe that that's a realistic target."

Hapag-Lloyd has invested heavily in terminal infrastructure in recent years.

"I think [the agreement] is very much aligned with the terminal strategy that wee had," Habben Jansen said.

"I think both of us firmly believe that it is important to have controlled access to key infrastructure if you want to run a reliable network. And as such, it's not a coincidence that those ports where we have invested, such as Wilhelmshaven and Tangier and Damietta are also part of [the] future network."

Maersk's Sigsgaard said the carriers' port networks would be similar to what they are now, but with the main difference being that smaller ports would be served by feeders rather than main line ships.

"We have decided those ports are served better through a dedicated shuttle that can take cargo to the connecting hub rather than using main line ships," he said.

"That will improve transit times because you can bypass coastal services and secure connectivity to the whole network from the hub."

All of this was designed to help secure against disruptions, which would inevitably still occur, whether from industrial action, weather events or other black swans.

"Disruptions will keep coming; the challenge is to find a network that has robustness to deal with those," Sigsgaard said.

"What does it take to generate resilience? Shorter loops so you can isolate effects from each other so you don't have compounded effects, which are common today. It also requires a hub system that can absorb some of these shocks and put things back on track when they do happen."

The two companies have an initial 36 months, followed by a further 12 months, to decide if the new arrangement works.

But both see it as a long-term agreement. Sigsgaard said the only reason for the four-year initial term was changes to regulatory oversight of VSAs.

"This is a long-term partnership but there are regulatory limits to what can be filed in certain jurisdictions, but we have the intent of this being a long-term partnership," he said. "We have not put an end date on the agreement."

Habben Jansen also sees the Gemini Cooperation as being for the long haul.

"I compare it with some of the co-operations that you see in the airline industry," he said.

"Not all co-operations need to stop after five or seven or 10 years. Look at an example like Lufthansa and United, where they have been working together for decades. I do not see why something like that could also not happen in shipping."