The Power 2015: Stability at the top

Through 2016 and beyond

In the mixed bag that was 2015, there was little agreement on whether it was a good or bad year, overall. For 2016, though, the outlook nearly across the board is for weak airfreight growth to continue, at least through this year.

The slowdown may even be felt at Expeditors, one of the industry’s most reliable success stories. Kevin Sterling, chief financial analysts at BB&T Capital Markets, pointed out that Expeditors has benefited from overcapacity in the market, which has provided it access to low buy rates for airfreight. Cheap buy rates have, in turn, helped drive operating margins at the company to a record 33 percent. But Sterling warned that buy rates may be close to bottoming out, while, at the same time, shippers are beginning to understand the overcapacity situation, which may “shrink the spread between buy and sell rates for Expeditors.”

“At this point, the global demand for airfreight is still ‘flying low,’” said Yusen’s Corliss. “Our forecast for airfreight volumes for 2016 is 1 to 3 percent, depending on the region.” He said Yusen will focus on its “key core verticals” – automotive, aerospace, healthcare and retail – and on “notable long-haul markets,” such as Asia to the Americas, and Asia and Europe.

Sinotrans said it will focus any future growth in markets in North America, the EU, Australia and Southeast Asia, and that its “core business and strategy will remain heavily focused on airfreight forwarding, e-commerce and professional logistics.”

For Kintetsu, Smith said trans-Pacific lanes are expected to be accretive for the remainder of 2016 and may continue 2015’s trends of extra M&A activity. Kintetsu, which already has a 49 percent stake in Hong-Kong-based Trans Global Logistics Group (TGLG), may be planning an additional purchase that would give it majority ownership in the company. Smith noted that TGLG has connections to a large number of retail customers and the know-how to manage many of the focus commodities outlined in KWE’s medium-term management plan.

Meanwhile, Kerry Logistics entered into a memorandum of understanding to raise its stake in Chennai-based Indev Logistics Pvt. Ltd. from 30 percent to 50 percent, as it prepares to handle increased demand for logistics services from growth in ecommerce and industry in India. With a 50 percent stake, Kerry will be able to rebrand the Indian logistics provider as Kerry-Indev Logistics. Kerry cited “an increasingly positive view of India’s economic prospects,” as the key rationale behind the decision.

Looking ahead into 2016, Kerry said it expects significant growth in its freight forwarding unit from a soon-to-close acquisition of 51 percent of an unnamed, California-based, full-service forwarding company. The transaction is expected to bring substantial increases to the volume and profitability of Kerry’s freight forwarding unit by the year end.

Last year may have been the “year of the merger,” but 2016 will most likely see some more M&A activity over the horizon. “We may not see as many large $100 million deals,” Armstrong said, “but ongoing market consolidation is expected.”

The Power 25 List | HOME | Three to watch