Air Cargo World Magazine - Americas

Sluggish freight volumes out of Asia and shifting product mixes stifled UPS’ first-quarter growth, despite a 10-percent, year-over-year, surge in diluted earnings. But the integrator’s recent movement on the acquisition front should help boost future revenues.

UPS made a significant investment on March 19, when it bought Dutch shipper TNT Express for $6.77 billion. Its February acquisition of Brussels-based Kiala is also expected to expand the integrator’s service portfolio. In a conference call discussing the company’s first-quarter earnings, UPS CEO Scott Davis commented that Kiala’s “retail delivery network and unique technology will benefit UPS, as we continue to look for ways to serve the growing [business-to-consumer] market, especially outside the U.S.”

For its part, FedEx has been acquiring companies in the first quarter to expand its European reach. One month after the firm agreed to purchase Polish shipping company Opek Sp.z o.o., FedEx announced plans to procure French business-to-business express company Tatex. The exact terms of the deal haven’t been disclosed, but the acquisition will give FedEx Express access to a domestic ground network that handles 19 million shipments a year and generates approximately €150 million in annual revenue.

Frederick W. Smith, CEO of FedEx Corp., said the Tatex acquisition will boost the company’s operations in Europe even more. “FedEx has always recognized the importance of our Europe, Middle East, Indian Subcontinent and Africa — EMEA — region and its many unique marketplaces to global trade, and this acquisition shows we are continuing to systematically and strategically invest in growing our network and value proposition in these important areas of the world,” he said in a statement.

“The Tatex business complements FedEx’s existing operations in the French market, and will enable the company to provide additional local services in one of Europe’s largest geographies, to its customers around the world,” Smith continued.

FedEx is also branching out product-wise, taking the company’s SenseAware monitoring service to the UK, Australia, Singapore and Canada. According to FedEx’s Chris Swearingen, officials hope to offer the service in a significant number of countries by the end of 2012.

“There’s a large demand for the product,” he said, pointing out that it was originally targeted at the life sciences industry, but the scope has broadened to auto parts, perishables, art — pretty much anything.

SenseAware provides customers with real-time information about their shipments, and Swearingen said that some clients are now requiring SenseAware data long before their freight is loaded onto the plane. “It’s really about giving that end-to-end visibility inside the package,”he said.

UPS’ product expansion is occurring on the time-critical side, branching those products out to its Latin American network, a region where it more than doubled its freight capacity in the first quarter. UPS has added Honduras and Nicaragua to its UPS Express Freight network, offering the two Central American nations day-definite transportation services.

Scott Aubuchon, UPS’ director of international airfreight, said Nicaragua, in particular, demanded time-critical cargo service. According to Aubuchon, the nation exports nearly 58 percent of its commodities to the U.S., including seafood, apparel and gold; trade between Nicaragua and the U.S. has increased 21 percent per year over the last two decades.

Trade between Honduras and the U.S. has also surged in recent years. After reinforcing its manufacturing capabilities to serve the North American auto industry, Honduras now ranks as the third largest exporter of automobile wiring harnesses to the U.S. Aubuchon expects imports from Honduras and Nicaragua to the U.S. to continue to grow, thanks to near-sourcing and the continued effects of the 2006 free-trade agreement among the Dominican Republic, Central America and the U.S.

After protracted public negotiations, UPS will acquire TNT Express for $6.77 billion, a deal that comes a little more than a month after TNT Express rejected UPS’ $6.4 billion acquisition offer. read more

Weakened economies around the world haven’t impaired freight carriers’ Valentine’s Day flower volumes, according to several reports. Numerous airlines have actually experienced a boom in operations and have had to deploy additional aircraft.

IAG Cargo, for instance, transported more than 700 tonnes of Valentine’s flowers on behalf of Iberia Cargo and British Airways World Cargo. Although BA is simply on par to repeat its 2011 Valentine’s performance, Iberia has already seen a 6.7 percent, year-over-year, surge in flora volumes this year.

Most of the flowers transported on Iberia’s flights were grown in Colombia, Ecuador, Costa Rica and Guatemala and sold to florists in Spain, the Netherlands and the UK, according to a press release. Colombia is by far the top flower exporter, however, with Central American destinations ranking among the main exporters of bouquet foliage. Not surprisingly, roses remain the most-transported flower, followed by carnations.

On the import side, Japan has emerged as a key consumer of Valentine’s flowers. Carmen Taylor, managing director of sales for American Airlines Cargo’s Latin American sector, said AA’s Bogota-Narita trade lane, which was launched in 2011, has been inundated with flower traffic this year.

“[Despite the recession], we’ve actually seen an increase of luxurious products on flights,” Taylor said. “I guess flowers are something that is still key in people’s lives.”

Flowers also have unique cold-chain requirements, which is one of the reasons why AA Cargo is launching a perishables facility at Dallas/Fort Worth International Airport in the second quarter of 2012. Taylor said the carrier established a similar facility at Miami International Airport in October 2006. And although both facilities are located in the U.S, Taylor said America is not AA Cargo’s top concern. “Most of our focus is on flowers beyond our U.S. gateways,” she said.

Unfortunately, Taylor added, the European market has been slightly disappointing in terms of flower demand. Spain has been especially weak. “Spain is going through a recession like a few other countries in Europe, so we’ve seen less flowers going to Spain,” she said. Taylor admits that AA Cargo has also witnessed lower demand among some nations, particularly European ones, for foreign-grown flowers.

Lufthansa Cargo has reported strong Valentine’s Day flower volumes on its routes from South America and Africa to Frankfurt. In fact, the German freight carrier said flew 1,100 tonnes of flowers to its Frankfurt Airport hub in preparation for Valentine’s Day 2012. This volume, which is equivalent to 13 full MD-11 freighters, is consistent with 2011 levels, Lufthansa Cargo’s Michael Göntgens said.

Valentine’s Day 2010 was a different story, he said. Weakened markets resulting from the global recession led to 30-percent to 40-percent lower flower volumes in 2010 than in 2011. 2010 also presented challenges to FedEx, a spokeswoman for the logistics provider said. Since Valentine’s Day 2010 fell on a Sunday, FedEx partnered with ProFlowers to coordinate overnight deliveries.

Even though Valentine’s Day 2012 occured on a Tuesday, the FedEx spokeswoman said this year has been just as taxing for FedEx. “The weeks leading up to Valentine’s Day continue to remain some of the busiest of the year for FedEx,” she said. “The number of Valentine’s Day deliveries from e-commerce florists and retailers continues to grow each year. And due to the perishable nature of flowers, airfreight is often the preferred mode for flower transportation.”

Increasing demand for flower transportation is also why Tampa Cargo tasked the now-insolvent World Airways with providing charter flights in late January and early February. According to a press release, World Airways flew hundreds of tonnes of flowers from Latin America to North America on Boeing 747-400 freighters on behalf of Tampa Cargo to meet the Valentine’s Day rush.