The Power 25: Top forwarders grow through acquisition

What’s in a number? For businesses, numbers can provide a fairly accurate picture of the health of a company. In our “Power 25” list of the top global airfreight forwarders, Air Cargo World uses numbers to track the rise and fall of the major players in the market. But numbers only tell part of the story.

For example, Switzerland-based forwarding giant Panalpina seemingly had a less-than-stellar year, based on numbers alone. Total airfreight tonnage for 2015 fell 2.5 percent to 836,000 tonnes, while gross revenues plunged about 7 percent to just over US$6 billion, thanks mostly to the collapse of the oil and gas exploration market, in which Panalpina is heavily involved.

Yet, behind the basic numbers for 2015, and in spite of a sluggish air cargo market in general, Panalpina’s net income rose to $89.2 million from $88.2 million in 2014. “We have maintained profitability in a year that was characterized by a soft market; the low oil price, negative currency impacts and high IT investments on our end,” said Panalpina CEO Peter Ulber. “The results prove our resilience in more difficult times.”

As a result, Panalpina managed to maintain its No. 6 ranking on the Power 25 list. The company is also well-positioned for future growth thanks to the majority-stake purchase last November of Airflo, part of the Dutch Flower Group and the second-largest airfreight forwarder in Kenya, specializing in the booming fresh-cut flower trade from East Africa.

“The Airflo acquisition is going to add another 40,000 tonnes per year of air cargo for Panalpina,” said Evan Armstrong, president of Armstrong & Associates, the Wisconsin-based market research firm that helped Air Cargo World compile the Power 25 list. “This is one of many examples from last year of a forwarder achieving potential growth through the M&A route.”

In fact, Armstrong said 2015 could be described as “the year of the merger.” In its research, Armstrong & Associates counted 11 acquisitions of 3PLs worth $100 million or more last year alone. “That’s the highest number we’ve seen since we’ve began tracking the industry in 1999,” Armstrong said, adding that, while some of these mergers boosted air cargo volumes for the purchasing companies, others generated one-time costs that dragged down profits.

2015 was also notable, Armstrong added, for forwarders reporting their highest air cargo volumes during the first half of the year, rather than the second, when peak season usually dominates. In this case, the U.S. West Coast port slowdown was the main catalyst, creating artificial demand for air cargo

services in the first quarter. While full-year air cargo demand in 2015 was almost flat with the previous year, the overall 3PL market, at least in the United States, grew by 4.5 percent in 2015, to a total of $71.9 billion, Armstrong said. In terms of gross revenues, the U.S. 3PL market grew 2.2 percent versus 2014 figures, reaching $161.2 billion. Of that total, freight forwarding operations netted $19.3 billion in 2015, a 4.8 percent increase over the previous year.

Click here for the Power 25 list for 2016

More from the Power 25:

• Analysis: Forwarder stability at the top
• Three forwarders to watch in 2017
• Welcome to the club: First time on Power 25