The Power 25: Top forwarders rise above 2020’s capacity crunch

A look back at 2020’s airfreight forwarding trends presents a fairly bleak picture at first glance: Volumes were down on average for the world’s largest forwarders, and the year featured multiple declarations of force majeure from major forwarders due to air and ocean shipping issues. Problems emerged from the beginning of the year as the COVID-19 outbreak in China halted shipments on Asia-Pacific trade lanes, then European trade lanes, and eventually around the world. While there has been some recovery in capacity, the market is still virtually unrecognizable from recent historical patterns. Despite that discouraging surface-level impression, a deeper examination reveals a year marked by creative problem-solving, digital innovation and intense competition for capacity. Among these solutions are the development of extensive charter networks, increased willingness to book cargo shipments through digital platforms, rerouting of cargo to avoid choke points at congested ports and airports and targeted acquisitions to bolster in-demand business areas. However, with that in mind, most of the world’s top forwarders grew their revenues in 2020, despite a slight drop in average tonnage transported across the Power 25 airfreight forwarders. While they were undoubtedly assisted by the dramatic increases in airfreight rates recorded during the year, their willingness to think outside the box to secure cargo capacity in cooperation with their carrier partners illustrated the long-term benefits these 3PLs are receiving from their longstanding partnerships with cargo carriers. “With the very tight air cargo capacity we have seen from decreased passenger aircraft belly capacity, 3PLs with access to freighter capacity and those with established air charter capacity have fared well,” said Evan Armstrong, president of Armstrong & Associates, which helps in the annual formation of Air Cargo World ’s Power 25 ranking . “ Providers with ‘locked in’ capacity have also been able to garner very profitable freight on the spot market.” The tonnage and revenue figures used in the Power 25 ranking are based on a combination of Air Cargo World research and data from Armstrong & Associates. View the full Power 25 ranking here. Keeping it moving DHL Supply Chain & Global Forwarding maintained its spot atop the Power 25 ranking with 2020 airfreight tonnage of 1.67 million tonnes. DHL Global Forwarding (DGF) has reigned atop the Power 25 since at least 2012, based on our available records, although like most of the forwarders on this year’s ranking, DGF reported a significant year-over-year decrease of 18.7% in its airfreight tonnage. That did not translate into a revenue dip, however, as the sky-high airfreight rates reported through most of the year led to a 4.2% YoY increase in revenues, to $28.5 billion. DGF was among the forwarders were forced to declare force majeure (FM) on air shipments early in the pandemic, following its February FM declaration of ocean shipments on the Europe-Asia trade lane. In March, DGF expanded its FM to air and ocean shipments due to extreme volatility when most air and ocean transportation was suspended due to travel restrictions. Since then, however, DGF has bounced back, launching a series of cargo charters on the trans-Pacific, trans-Atlantic and Asia-Europe trade lanes , and has leaned on its relationships with its carrier partners, as well as the express arm of its parent organization, Deutsche Post DHL Group. “At DGF we have an extensive global network, and work with numerous airline partners to access and provide capacity to our customers,” said Andreas von Pohl, senior vice president of airfreight for DGF, Americas. “But we also know how effective collaboration is — and we clearly have seen the benefits in collaborating with our sister unit, DHL Express.” Von Pohl added: “The DHL Express network is a scheduled network and provides reliability and predictability for our customers. Where needed, we will continue to find ways to secure capacity with our ‘yellow tails’ along with our own DGF partner network.” The forwarders in the No. 2 and No. 3 spots, Kuehne+Nagel and DSV Panalpina, continue to close in on DGF’s top spot, however. Kuehne+Nagel also took the No. 2 spot from DSV Panalpina in 2020, reporting a relatively small 12.8% decrease in airfreight tonnage to 1.43 million tonnes and a drop in gross revenue of 0.3% to $25.8 billion. After DSV’s major jump last year thanks to its acquisition of Panalpina, 2020 saw a slowdown in growth, with a 26.2% decline in airfreight tonnage to 1.27 million tonnes and a 2.3% drop in revenue to $18.3 billion. Big movers On average, the top 25 airfreight forwarders reported a 2.5% decline in airfreight tonnage, alongside gross revenue growth of 8.1%, illustrating the effect the loss of airfreight capacity during the year had on rates. However, among the more average results were a few stand-out figures, many of which highlight the importance of the trans-Pacific trade lane to 2020 airfreight. Apex Logistics moved up four spots to No. 7, thanks to staggering YoY tonnage growth of 44.2%, to 750,000 tonnes. Apex was well-positioned to serve the in-demand trans-Pacific trade lane , and doubled its cargo charters YoY during 2020, to around 1,200, Mike Piza, senior vice president of corporate business development and customs brokerage, told Air Cargo World in an interview early this year. Apex is also being acquired by the No. 2 forwarder, Kuehne+Nagel, which is set to push that company to the No. 1 spot in the 2021 rankings. Apex also realized a gross profit increase of 51.6%, the largest increase of any forwarder in this year’s rankings, to $10.1 billion. “Apex Logistics International has done very well as an indirect carrier managing dozens of charters from Asia to Chicago and New York,” Evan Armstrong told Air Cargo World . “It has also recently [during the second half of 2019] opened Columbus, Ohio, as an airfreight [charter] gateway. In addition, it is one of the few air freight forwarders with established air consolidation operations for exports from Vietnam, which has seen double-digit growth.” Its results were also helped by the “significant portion” of its revenues coming from fast-growing e-commerce, he said. Kerry Logistics recorded the second-largest tonnage increase for 2020, transporting 493,903 tonnes for a 20.6% increase. Kerry’s growth pushed it up two spots in the ranking to No. 13, and helped it to a revenue increase of 30.2%, to $6.9 billion. That was not the second-largest revenue increase, however; GEODIS’ gross revenue rose 43.2%, despite a 5.7% drop in tonnage. On the other side, several forwarders struggled in 2020 on either volumes or revenue. The largest tonnage drop was from No. 3 DSV Panalpina, although the revenue decline was minimal. Bollore Logistics also reported a substantial drop in tonnage, of 19.7%, although revenues improved by 1.6% to $5.8 billion. The largest drop in gross revenue was the 10.9% decline to $6.6 billion reported by Dachser Air & Sea Logistics. Moving in and moving out The 2020 ranking saw the addition of two new entrants to the list, both China-based: CTS International Logistics made its debut at No. 14, and AWOT Global Logistics stands at No. 22. The new additions are ousting two other Asia-Pacific-based forwarders, Japan’s Hitachi Transport Systems and Taiwan’s Dimerco Express Group, which Armstrong said was “a bit surprising.” According to Armstrong’s analysis, CTS’ freight forwarding segment is at the core of its logistics business, accounting for 70% of its business in 2020. Other services the Shanghai-based company offers include cross-border e-commerce logistics, project logistics, warehousing and aviation supplies logistics. The other new addition, AWOT Global Logistics, benefited from the demand for pandemic-related shipments of gloves, masks and other medical and PPE cargo, according to Armstrong. The company has also made inroads with fast-fashion and e-commerce customers since 2017, particularly in southern China, according to a carrier familiar with the forwarder. Although the company is new to the list, much of AWOT’s China-based and international sales and executive teams had prior tenure with former Power 25 forwarder Dimerco Express Group, according to a survey of LinkedIn profiles. While Dimerco and Hitachi no longer appear in the Power 25 ranking, their long-standing strength suggests these forwarders are still on the radar, especially given growth projections for Asia-Pacific trade lanes. For that reason, we are naming them among our “Forwarders to Watch” in 2021. What to expect for 2021? Consolidation Trends that emerged in 2020 or earlier, including a greater focus on consolidation, have solidified in 2021. Most notably, the No. 2 and No. 3 forwarders, Kuehne+Nagel and DSV Panalpina, announced plans for massive acquisitions of other Power 25 forwarders. Kuehne+Nagel in February announced it would acquire No. 7 Apex Logistics International, in a deal valued at around $1.5 billion . Alongside DSV’s acquisition of Panalpina in 2019, the tie-up is one of the largest examples of logistics consolidation in recent years. “For years, there has been a clear trend of consolidation,” Yngve Ruud, Kuehne+Nagel’s executive vice president for air logistics and an Air Cargo World Executive to Watch for 2021 , told Air Cargo World . “The reasons behind this are complexity, capital intensive operation, and the constant need for technological investments. With COVID-19, it has become clear that size matters, as we now see the global leading air logistic providers increasing their accumulated market share, and I believe this will be a catalyst for further consolidation.” Kuehne+Nagel’s acquisition strategy aims to either complete its service portfolio, strengthen an area in which it is already a leader, or close a gap in its service, Ruud said. The Apex acquisition meets these standards, he said, by fulfilling “our ambition to expand our strong footprint in Asia and North America and solidify our High-Tech, eCommerce, and eMobility service portfolio.” DSV Panalpina is also not resting on its laurels following the successful integration of Panalpina into its business. Late in April, the company announced it would acquire Kuwait-based Agility’s stand-alone Global Integrated Logistics (GIL) business unit in a deal valued by the companies at around $4.2 billion . DSV Panalpina CEO Jens Bjorn Andersen said at the time that Agility’s strong position in the Asia-Pacific and Middle East regions are supportive of DSV’s long-term network plans. Kuehne+Nagel’s acquisition would push it past DGF to claim the No. 1 spot in the Power 25, and while the addition of Agility’s logistics business to DSV could put the combined entity also within striking distance of DGF — illustrating an obvious advantage of mergers and acquisitions in quick expansion. Not all of the top airfreight forwarders are convinced that M&A is the best strategy for growth, however, as DGF’s von Pohl told Air Cargo World . “In our industry M&A have shown mixed results over time,” von Pohl said. “They can also be lengthy and take away focus and resources from the core mission to provide exceptional service to our valued customers. Therefore, DGF continues to focus on growing organically,” choosing to focus on innovation and customer requirements, he added. Careful evaluation of M&A targets is essential when pursuing that growth strategy, von Pohl explained. “Based on a company strategy and outlook and their strengths and weaknesses, an M&A case can potentially help mitigate weakness in a certain area of operation and could make sense,” he said. However, “one has to be careful to assess the risks, efforts and potential outcome.” The full Power 25 list 3 forwarders to watch through 2021 The secondary feature this month, from Associate Editor Kelly Stroh, highlights some of the novel ideas and intelligent solutions freight forwarders have pursued to secure capacity for their shipper customers.

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