The Power 25: Top forwarders face turbulent headwinds
With the continued stagnation in airfreight growth noted in the first quarter of 2019, global freight forwarders may be forgiven for waxing nostalgic for the heady days of early 2018, when the e-commerce surge was expected to keep the 2017 peak season going all year long. Sadly, those days were short-lived and, a full year later, the air cargo industry is facing much stiffer, chillier headwinds.
The cold slap of reality came in March, when Brian Pearce, the chief economist for the International Air Transport Association (IATA), gave a sobering account of the problems facing the air cargo industry at the World Cargo Symposium in Singapore. “The hard reality of the last 12 months is that we’ve actually seen no growth in the industry at all,” Pearce said, which is “something we certainly need to worry about.”
But not all air cargo forecasts are gloomy. As we are now seeing in our annual Power 25 list of the top airfreight forwarders in the world, only a few companies have reported slumping figures, and many of them are still predicting a recovery by the end of this year. “Overall, third-party logistics (3PL) in Europe grew about 14% last year based in U.S. dollars, but a lot of that is based in dollar conversion,” said Evan Armstrong, president of Armstrong & Associates, which helped Air Cargo World formulate this year’s Power 25 list.
But perhaps the most important news was the flurry of merger and acquisition (M&A) speculation in the industry toward the end of 2018. The main headlines were about No. 4, Panalpina, and No. 9, DSV, deciding in January 2019 to agree to a merger worth an estimated US$4.6 billion. For Panalpina, which topped the handling of 1 million tonnes of air cargo for the first time in 2018, the acquisition by the Danish DSV will make the combined company the third-largest airfreight forwarder after Kuehne + Nagel (K+N).
CEVA Logistics, still at No. 13, with a dip of less than 1% in airfreight last year, also saw some M&A activity, as ocean carrier CMA-CGM bought 98% of the Switzerland-based CEVA. “CEVA’s still got a heavy automotive and industrial operation – a lot of that’s through the service parts business, so they’re always going to need air,” Armstrong said.
This year proved to be one of the most stable in recent memory, with seven of the largest forwarders maintaining their position on the Power 25 list from the previous year. But holding rank didn’t mean every forwarder had a rosy year. For perennial No. 1, DHL Supply Chain & Global Forwarding, the German giant saw airfreight tonnage dip in 2018 by about 4.4% to 2.15 million tonnes, compared to its 2017 totals. “The problem with being the largest is that everyone’s picking at your customers,” Armstrong said. “We saw some of that going on this last year.”
Still, DHL’s forwarding arm handled about 400,000 tonnes more than the No. 2 forwarder, Kuehne + Nagel (K+N), in 2018, and the outlook for 2019 remains positive. However, DP-DHL’s Global Forwarding, Freight division reported airfreight volumes down by 3.9% for Q1 of 2019, the fifth straight quarter that saw y-o-y volume reduction in the division.
Switzerland-based K+N, meanwhile, reported a strong, 11% increase in 2018 airfreight, reaching 1.743 million tonnes for the year, helped, in part, by a January 2018 joint agreement with Singapore investment company, Temasek, to invest in logistics startups.
Germany-based DB Schenker, locked into the No. 3 spot, reported relatively flat airfreight growth (0.3%) to a little more than 1.3 million tonnes last year but was encouraged by its recent Good Distribution Practice (GDP) certification at Narita Airport (NRT). Manabu Tanaka, head of the company’s airfreight division in Japan, said the GDP cert is “good news for our healthcare customers, many of whom require stringent temperature and quality control measures.”
No. 5, U.S.-based Expeditors International, also joined the 1 million-tonne club, with a 2.6% increase in air cargo volumes. Meanwhile, UPS Supply Chain Solutions maintained its No. 6 position, while No. 7, Nippon Express, reported a 7.6% jump in air tonnage, which was just shy of 900,000 tonnes for the year.
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