Modal shift from sea lifts Kuehne+Nagel air yield in Q4

Switzerland-based Kuehne+Nagel reported Q4 gross profit for its airfreight unit up 16.9% year-on-year to CHF 374 million (US$407 million) despite air volumes that were 7.5% lower compared to 2020. Earnings before interest & Tax (EBIT) for its Air Logistics unit rose 134.8% to CHF 155 million ($168 million). The healthy airfreight yield, which reached 41% in Q4, resulted from rates already high because of scarce capacity on international passenger flights, and the unreliability of ocean freight in the lead up to peak season, which pushed time-sensitive shipments to airfreight. [caption id="attachment_65796" align="alignright" width="450"] Photo/Kuehne + Nagel[/caption] Blaming constrained ports, low capacity and in some regions, container shortages, many would-be ocean shipments were re-routed by air to ensure on-time delivery ahead of December holidays. These issues drove volume growth, according to Detlef Trefzger, CEO of Kuehne+Nagel, during a Q4 earnings call. Quarter-to-quarter, airfreight tonnage increased by 10%. “In addition, the cargo mix is different because perishables is under pressure and the perishable portion of our total volume has been reduced relative to the rest,” he said. Stability on the ocean front won’t immediately drive yields down, said Trefzger. “The market at the moment is driven by a lack of belly capacity. We are around 90% down [compared] to the normal belly capacity that we have seen in the networks globally in 2019,” Trefzger said. International long-haul belly capacity is in particularly acute supply. While some intra-Asian routes have seen a higher degree of recovery, Kuehne+Nagel does not expect international belly capacity to be back at 2019 levels before 2024 or 2025. Even with the expected gradual return of long-haul passenger flights, Trefzger expects healthy yields until 2022 at the earliest. As of 2022, “we might see the first signs of yield decline,” he said, stressing that a “collapse” in yield was not likely. Moving into Q1, K+N continues to see strong airfreight volume, with an increase compared to Q1 2019. Airfreight is strong, “not only because of the demand increase in general, but also because we won a good number of new business in the second and third quarter 2020,” said Markus Blanka-Graff, CFO of Kuehne+Nagel. Continued airfreight volume growth is expected following Kuehne+Nagel’s acquisition of APEX Logistics, announced on Feb. 22 , in a deal valued at between CHF 1.1 to 1.2 billion ($1.2 to $1.3 billion), according to Blanka-Graff. For the entire year, airfreight volume was 12.8% lower at 1.4 million tonnes, whereas EBIT rose 53.5% to CHF 505 million ($550 million), on a strong second half, particularly in Q4. EBIT for the full year was nearly flat, up 0.8% to CHF 1.07 billion ($1.16 billion), reflecting lower earnings across the freight forwarder’s other units. 2020 EBIT was 7.2% lower in Sea Logistics at CHF 423 million ($460 million), down 20.5% to CHF 62 million ($67 million) in Road Logistics and down 59.6% to CHF 80 million ($87 million) in Contract Logistics.

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