TNT – the final quarter

TNT published its first-quarter 2016 results. Or perhaps “final quarter” would be a better term, or “last full quarter.” After seventy years in business, TNT is counting down its final six weeks, with 6 June likely the day FedEx will formally acquire the Netherlands-based express company.

But in the meantime, TNT reported a net first-quarter loss of €14 million (compared to a loss of €19 million a year ago) as total revenue declined 2.2% y-o-y to €1.59 billion. Operating income for the quarter was up from €1 million in 1Q15 to €9 million in this year’s quarter.

Regarding the decline in revenue, the company pointed out that this year’s quarter had two fewer working days than 1Q15 and this, along with foreign exchange impacts and lower fuel surcharges had a considerable impact on reported results. Adjusting for these factors, TNT said it saw underlying revenue growth of 4.2%.

Operating income was likewise impacted by one off charges of €10 million, including €4 million related to the FedEx takeover. Adjusting for these charges, operating income for the quarter was €9 million, up from €1 million in 1Q15.

One interesting development not obvious from the chart at right is that results in the company’s International Europe segment were hit by “a drop in revenues and operating income in North America, which stems from the anticipation of the acquisition of TNT by FedEx.” That is, with the takeover looming, customers in North America are leaving TNT, moving either to FedEx, or other providers.

While in many respects TNT’s business will go on as usual after 6 June, one thing that will change is the company’s airline operation. Or, more accurately, airline ownership. European law forbids airline ownership by foreign entities, and earlier this year TNT signed an agreement with Ireland-based ASL Group under which, on completion of FedEx’s acquisition of TNT, ASL will purchase TNT Airways and Pan Air, the company’s two wholly-owned airlines. As part of the sale, ASL has entered into an agreement to operate flights for the FedEx/TNT combination.

The combined TNT Airways/Pan Air fleets are made up of thirty-three freighters, including two 747-400ERFs, three 777Fs, two 757-200Fs, one 757-200 combi, fourteen 737-400Fs, two 737-300Fs, and nine BAe 146QTs. TNT also ACMI-leases twelve freighters from various European carriers, but these will not be included in the sale to ASL. Interestingly, the two 747-400ERFs may not be included, either. In its discussion of the sale of the airlines, TNT said “Consequently, TNT Airways and Pan Air (excluding the two Boeing 747 freighters) are reported as assets held for disposal as at 26 March 2016.” What will become of the 747 freighters is unclear.