Consultant Insight: DHL Express reports healthy 2019, but will it continue?

[caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] While many cargo operators reported slowing growth or declines in volumes for last year, Deutsche Post DHL Group’s Express division , proved international air demand not only still existed , but was strong in 2019. Indeed, its Time Definite International (TDI) service recorded volume growth of 5.7% and its Time Definite Domestic (TDD) recorded volume growth of 7.9%. Overall, year-over-year growth within the Express division was greatest in the Americas with a 9.2% increase in revenue to 3.6 billion euros . This was followed by the Middle East and Africa region with a 7.6% increase in revenue to 1.2 billion euros and then the Asia-Pacific region which reported a 6.2% increase in revenue to 6.1 billion euros . Europe, t he largest region in terms of revenue, saw the smallest YoY increase in revenue, 5.9%, to 7.6 billion euros . It’s difficult to make accurate comparisons with UPS and FedEx due to service level definitions , how each report earnings and differences in time-period reporting — as in the case of FedEx . B ut from a broad perspective, DHL’s overall TDI service appears to have enjoyed a larger YoY growth rate , as compared with UPS and FedEx. For 2019, revenue from UPS’ international package service declined 1.5% while volume dipped 0.4%. Meanwhile, for FedEx’s recent fiscal year , which ended May 31, 2019, Express revenue increased 3.2% while average daily volumes increased 3.6%. It s most recent quarter , which ended Nov . 30, finds Express revenue did not materially increase as compared to the prior year while average daily volumes were down almost 5.0%. FedEx and UPS’ greatest strength, in terms of Express, is within the U.S. domestic market and U.S. inbound and outbound. A look at how well DHL Express did in just the U.S. market is not readily available since the U.S. is part of its Americas region, but one can make an assumption , since the region’s headquarters is based in the U.S. , that the U.S. makes up a large percentage of America’s growth. For 2019, DHL’s Americas region reported TDI revenue per day increased 5.4% while revenue per day increased 4.5%. A good economic environment likely played a role here as did e-commerce cross-border demand. All three Express providers have undertaken similar strategies by courting small- to medium - sized businesses and vying for e-commerce volumes. Speed is important for such volumes and for the three providers, each has invested in fleet upgrades . In addition, all three have invested in global facility expansion s and automation. DHL Express is expected to receive six new Boeing 777F-200 cargo aircraft this year , with the first one delivered in February at its Americas air hub at Cincinnati/Northern Kentucky International Airport (CVG). The current freighter will be operated by DHL Express’s partner airline Kalitta. The renewal is part of the overall modernization of the long-haul intercontinental fleet of the courier company and replaces older planes. The new planes are also more fuel-efficient and reliable than older planes, reduc ing CO2 emissions by 18 % . In terms of facility expansions, in 2019, DHL Express announced a number of plans , including the expansion of its gateway at Canada’s Hamilton International (YHM) , to meet double-digit growth in shipment volumes. It also upgrade d its air hub at Cologne-Bonn Airport (CGN), allowing it to process up to 20,000 shipments per hour and announced an investment of $ 151.7 million in Istanbul Airport (IST), where it currently operates a 42,000-square-meter facility . While there is optimism for growth in 2020, the year has had a bumpy start due to the coronavirus pandemic. The company recorded a 70 m illion euro hit to its operating profits in February with its E xpress and F reight F orwarding businesses , which have been particularly affected by a decline in cross-border trade flows into and out of China. “Deutsche Post DHL Group had a very good year 2019 and a successful start to 2020 in January ,” said CEO Frank Appel “ Thanks to our broad geographic set-up and our comprehensive portfolio we are more resilient than other companies. However, a worldwide crisis like the coronavirus does not leave us unaffected. It is currently hard to judge how strong the impact on our business will be.” Improvements are slowly emerging. On March 10, the company told Reuters it ha d started to see volumes in China recover from the impact of the coronavirus outbreak . According to Finance C hief Melanie Kreiss, DHL’s express volumes have started to recover in China and the company was putting planes back into the network . However, COVID-19 cases elsewhere around the world are on the rise and are negatively impacting air movement. But with the latest announcement from the U.S. government to restrict passenger flights from Europe, it is possible that DHL Express , as well as FedEx and UPS , could see a bump in demand. As the pandemic continues , DHL Express is actively investing in its global network . It recently announce d a new warehouse in France that is twice the size of the one it replaces a s well as a large investment in the Egyptian market. The company plans to add six new branches in Egypt this year , adding to the 33 existing ones as part of its strategy to boost the country’ s position as a logistics hub in the African continent. While 2020 will likely be a rough year for all three Express providers , the collaboration with each of their freight-forwarding arms, the providers should see an OK year , depending on such risks as the coronavirus. Of the three, however, DHL Express seems the best placed to achieve global growth in terms of revenue and volumes.

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