DHL trades volume for value to keep air cargo profitable

DHL Group entered 2025 with continued focus on operational control and financial discipline, maintaining profitability despite weakening demand in global air cargo. In the first quarter, the DHL Group’s revenue rose 2.8% year over year to 20.8 billion euros($22.46 billion). EBIT increased 4.5% to $1.47 billion, and free cash flow reached $747 million, up 14% from the previous year. These results extend the company's financial positioning from 2024, when it posted $91 billion in revenue and $6.37 billion in EBIT — both above pre-pandemic benchmarks. In early 2025, DHL continued to prioritize yield optimization, cost control and selective capital deployment. Air cargo operations, comprising the Express and Global Forwarding and Freight (DGF) divisions, show how these priorities are being implemented across segments with differing demand dynamics and geographic exposures. Profit maintained despite volume contraction The Express division, a key driver of DHL's air cargo network, reported a 2% increase in revenue to $6.62 billion in Q1. EBIT grew by 4.8% to $715 million, resulting in an EBIT margin of 10.8%, up from 10.5% a year earlier. This earnings expansion occurred despite a 7.1% decline in time-definite international (TDI) daily shipment volume, which dropped to 975,000. The revenue from TDI services rose 1.2% to $79 million per day, driven by rate increases and prioritization of high-yield traffic. As shown in Figure 1, TDI shipment volume has been on a decline since 2021 while yields have remained elevated, which aligns with the broader rate increases and shift toward higher yielding cargo. Figure 1 – DHL Express time-definite international (TDI) yields and shipments 2007-2024 Cost and capacity adjustments were also central to maintaining profitability. Express reduced air capacity by 5% YoY and cut block hours by 4%. This improved the total weight load factor by 120 basis points. The division also recorded a 7% decline in aviation supply costs (at constant fuel prices), along with reductions in hub operating costs and delivery expenses. United States pickup and delivery costs fell by 8%, supported by route consolidation initiatives. Direct headcount in Express declined by 3% YoY, while indirect staff numbers remained stable. The adjustment was aligned with a broader strategy to match resource levels to demand while preserving service quality. The consistent EBIT margin reflects the effectiveness of pricing adjustments and capacity management. DHL implemented its annual general rate increase at the start of the year, which contributed to a 4% increase in like-for-like revenue per kilogram. The result is a more resilient margin profile in an environment where demand softness continues to challenge cargo operators globally. Revenue stability masks margin erosion DHL’s Global Forwarding, Freight division, which includes the company’s broader air freight forwarding operations, reported a more complex outcome. Revenue increased 3.2% to $5.14 billion in Q1. However, EBIT declined 23.2% to $218 million, pulling the EBIT margin down to 4.2%. Within this, DGF reported a 5.8% revenue increase to $3.81 billion, while the Freight unit (focused on European road freight) contracted 3.5%. Air freight volumes in DGF declined 3%, particularly on Asia-Europe trade lanes. Revenue from air freight rose 4%, but gross profit fell 1.8%, pointing to increased cost pressure. The decline in EBIT is attributed to continued margin compression, a result of rising handling and compliance costs not fully offset by yield gains. DGF’s gross profit-to-EBIT conversion ratio dropped to 25.3% in air freight and 17.6% for the division overall. This aligns with 2024 margin performances ( Figure 2 ), where Global Forwarding and Freight closed at 5.5%, showing the sustained pressure on earnings conversion. While revenue has remained relatively stable, the chart shows that margins have declined across all major segments since 2021 except for the Supply Chain segment. Figure 2 – DHL profit margin by segment 2006-2024 As for Q1, the Freight business continues to underperform amid weak European road freight demand and pricing constraints. Gross profit in this unit fell 13.1% YoY, offsetting relatively stable performance in forwarding. Ocean freight, while not a focus, posted modest growth, with volume up 1.4% and revenue up 11.8%. The division’s ongoing exit from low-margin, high-volume business continues to reshape cargo mix in favor of higher-yield lanes and customers. Impact of trade policy on cargo patterns Recent U.S. tariff changes have added volatility to trade flows as seen in Figure 3 . There has been a sharp decline in U.S. imports from major trading partners in the first half of 2025. Chinese imports are approaching levels not seen in the past decade, excluding the pandemic. For DHL, the impact is twofold. First, certain Asia-U.S. lanes are seeing reduced volume or shipment reconfigurations, affecting cargo patterns. Second, these disruptions create demand for value-added logistics services, including bonded warehousing, tariff classification consulting and duty recovery services. These offerings support margin stability even as baseline transport demand fluctuates. Figure 3 – Monthly U.S. imports of goods from China vs. Mexico vs. Canada (Millions) The group’s diversified geographic exposure across APAC, Europe and the Americas limits exposure to any single policy shift. DHL reported double-digit revenue growth in seven of its 20 targeted arkets, including India, Turkey and several Latin American economies. These markets are central to the group’s long-term growth allocation model, supporting a strategy that balances mature core markets with high-growth emerging regions. This approach enhances resilience against regional downturns while capturing upside in dynamic trade corridors. Cost measures, capital deployment DHL’s "Fit for Growth" cost program, launched in Q1, targets $1.08 billion in savings by 2027. The integrator has already initiated workforce reductions, delivery route consolidation and procurement optimization as part of this effort. The program is designed to permanently lower the cost base without compromising service levels. Q1 capital expenditures totaled $498 million, allocated primarily to network infrastructure, digital upgrades and air fleet modernization. This follows a full-year 2024 CapEx of $3.32 billion. Liquidity remains strong, with $4.54 billion in available cash and a $4.32 billion undrawn syndicated facility extended through 2030. The group also issued $2.43 billion in bonds during the quarter to refinance existing liabilities. Outlook: Capacity control, margin focus DHL’s approach prioritizes price discipline, selective deployment of air capacity and logistics complexity services over aggressive expansion, following a common trend in the industry. Volume softness is expected to persist through mid-2025, particularly on Asia-Europe and intra-European routes. However, cost flexibility, rate control and customer migration toward premium services are helping maintain profitability. In the air cargo market, where macro demand remains below trend and input costs remain elevated, DHL’s ability to manage costs while preserving pricing power positions it to weather further volatility without compromising financial health. Over the long term, DHL’s goal is to stay flexible in its network, protect margins and gradually invest in better technology and more efficient fleet operations. Editor’s note: All amounts have been converted to U.S. dollars.

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