DSV cautious on further air charter expansions

Danish logistics company DSV reported strong full-year performance for 2021, with higher airfreight volumes and yields, alongside the acquisition of Agility’s Global Integrated Logistics (GIL) unit , helping the Air & Sea division achieve gross profit growth of 42.3% year over year to $3.7 billion. [caption id="attachment_96998" align="alignright" width="450"] (Photo: DSV)[/caption] Like many freight forwarders, DSV has increasingly relied on chartered freighter aircraft for airfreight capacity during the COVID-19 pandemic, and has developed the legacy Panalpina charter network inherited as part of its acquisition in 2019 . While DSV has since expanded on that network , the company is adopting a more cautious approach to charter expansions in 2022, CEO Jens Bjorn Andersen said during today’s conference call on the company’s 2021 performance. The charter network represents about 12% of DSV’s total airfreight volumes, Andersen said, but the company is focused on “not getting into a situation where we have capacity we cannot fill.” “It’s difficult to say how long current market conditions will continue, but they’re likely to last well into 2022 and maybe for the duration of the year,” Andersen said. Even as the airfreight market does normalize and yields come down, DSV’s outlook is for yields to remain above pre-pandemic levels, CFO Michael Ebbe added. The year ahead will also see the completion of integration work for last year’s GIL acquisition, which the company said in its annual report should be finished in the third quarter. Of the 63 countries where the GIL unit operates, 39 have been onboarded, accounting for about 75% of GIL’s revenue, Andersen said on the call. Strong 2021 performance aside, DSV leadership is optimistic about its outlook in part due to the fragmented third-party logistics market, where DSV estimates its market share as one of the world’s largest 3PLs is only about 5%. Meanwhile, though digital forwarders have recently dominated headlines and brought in significant investments, DSV is confident that legacy freight forwarders, which have spent years building up their networks, infrastructure and relationships, will continue to have the advantage in the forwarding market. Leveraging data for process improvements is necessary to meet the demands of the current market, but with freight forwarders dealing with a wide array of shipper customers, “customers are not necessarily good on data,” said COO Jens Lund during today’s call. “As the classical forwarder, we will have capabilities that allows us to enhance the low-quality data that we receive, and we can do a lot of other things” thanks to the infrastructure, customer relationships, carrier relationships and “a hundred other attributes that we have developed over years and years, which the new digital forwarder don't have,” Lund said. “I think that's the problem for many of these new digital forwarders, that they don't have the classic capabilities, so they need the productivity on enhancement of data and then they need also the scalability of their organization. They think they can run a business on the third floor out of an office somewhere in the middle of a big city. But you can't do that.” Lund did not name any digital forwarder specifically but noted that DSV is closely monitoring them and has noticed that “many of them, in order to get traction, they develop attributes that make them look quite similar to us, or basically the classic forwarders.” In turn, DSV is focused on improving its own digital offerings and enabling API capabilities “across the board so that in reality, we can deliver the same on data and on integration as these types of companies can,” Lund said.

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