The word “volatile” has become a common descriptor of the air cargo market for, it seems like, the past couple of years. No matter who is doing the talking — representatives from carriers, integrators, forwarders or shippers — everybody has been echoing the same phrases. Though the wider market has turned around in some areas, for freight forwarders, uncertainty and, yes, volatility are still very much present challenges.
In this awkward, if not quite dark, scene exist the top forwarders in the world. Ranked by Armstrong and Associates according to gross revenue and all-around tonnage (air and sea), these 25 companies represent the best of the best when it comes to international freight forwarders. Some of them rely heavily on the ocean, and a few take a more balanced approach than others, but all the busiest forwarders are on the list. From the top-of-the-pack DHL Global Forwarding to Sankyu, which handled 18,060 tonnes in 2011, many firms have stayed in the top positions all throughout the downturn and the slow recovery. (Air Cargo World has taken the original rankings and listed the companies, top to bottom, by airfreight volume.)
Dachser, which was ranked last in 2010, rose to 23rd last year on the strength of gross revenues of $5.92 million. Though still a small player in the international airfreight industry, company officials feel the seismic shifts of the market just as much as the larger firms.
In the current market, Thomas Reuter, Dachser’s managing director of air and sea logistics, is seeing less demand for the company’s services from important, established economies. This, he says, leads to a diminution of important freighter services. In spite of this, the air business is growing, with the success of Dachser’s GLOBAL program and the inauguration of its second iteration. According to Reuter, the second part of the program will coincide with new offices in 21 countries and a planned doubling of activity to 2.2 billion. The company’s strongest trade routes are China to Europe and to the U.S.
According to Reuter, Dachser recently ramped up its activities in Singapore and Malaysia, with an increased presence in Vietnam coming soon. “The airfreight market is still a very volatile business,” Reuter says. “Rates and surcharges are rising and falling within short time frames, which makes it challenging to predict stable rates, especially when it comes to tender requests.”
Though Dachser has experienced increasing success with airfreight, the path forward, Reuter says, is still rife with challenges. Cargo screening is always an issue when dealing on the international airfreight stage, and while the U.S. and EU recognition of worldwide programs has helped alleviate screening headaches a little bit, bottlenecks still exist. Fuel is also a very-present concern, as is the resulting shift toward seafreight. But even though Dachser’s path is a bit obscured, Reuter is optimistic.
“It is hard to predict the next months to come, as air and seafreight business is and was always tightly connected with the international world trade economy,” he says. “In times like these, where European economies are losing ground, where the U.S. economy was on hold due to the presidential elections, and even China starts to lower their own economic expectations, it really does become a challenging environment for air and seafreight forwarders.”
Georges Van Hove, corporate airfreight director at SDV/Bollore Logistics, saw his company clear 520,000 tonnes of activity last year, up from 500,000 tonnes in 2010. The 2011 total puts SDV at No. 10 on the list. Van Hove says the current market seems positive, but lower than last year. He’s holding out hope for a peak toward the end of the year, which could possibly mean activity mirrors 2011’s results, which, in his estimation, would be excellent. At SDV, the company is more attuned toward airfreight than some others on the list, with 35 percent of the group’s turnover dedicated toward air cargo as opposed to about 17 percent geared toward seafreight, he says.
Most of this airfreight comes from Africa, where SDV is at the top of the heap, Van Hove says. The company has 250 offices in 43 countries in the continent, which gives them great positioning for a shift that van Hove says is coming. “Overall, our activities have remained quite steady; tonnages are following the global economic trends. But the center of gravity, which was China to Europe, is now moving from China to Africa,” he says. SDV workers are also focusing on what they see as the top emerging market: the area of India and Pakistan.
Van Hove, though, anticipates more of a problem in seafreight. He’s seeing a “more and more frequent translation” of airfreight to seafreight due to the cheaper ocean voyages. Customers that need goods flown to Asia are now asking him to ship commodities to a hub point like Singapore and then fly the goods to their final Asian destinations.
Even though Van Hove has experienced some positive signs during the first few months of the year, he’s not hopeful for anything more than a flat year for 2012. Early expectations were for 5-percent to 10-percent growth, but the way things are looking, a steady path forward might continue for at least another year. “The worrying thing … is that nobody really talks recovery,” he says. “It’s flat growth at the best — at least for 2013, which will again be a bleak year.”
DB Schenker Supply Chain and Global Forwarding saw nearly 1.15 million tonnes of airfreight in 2011, slightly down from 2010’s mark of 1.225 million. Thomas Lieb, chairman of the DB Schenker Logistics board, says the slight contraction in airfreight has carried through to this year. He estimates the market fell by 3-percent to 4-percent in the first half of the year.
Lieb describes the aim to reach 2011’s activity as a fight. The firm’s activity from Asia, which accounts for half of its volumes, is weak. He points to new challenge of communicating across the board electronically as another reason for the airfreight declines. Finally, a bit of in-house reorganization in Schenker’s domestic U.S. market, which occurred last summer, has also contributed to slow airfreight numbers.
“New aircraft deliveries and a shrinking market create difficulties for our carriers in the meantime,” he says. “Reasons for the shrinking market are the softening economies and the shift of cargo to other modes of transport.”
Lieb’s other concern, of course, is the sea. He says that once customers make the switch from airfreight to seafreight, there’s really no reason for them to return to the skies. If transporting goods by sea works well, and it saves money, why would they switch back? “Also in the past years, we have seen new or better technology on the ocean side, which made transportation of traditional airfreight goods in a container possible,” Lieb says. “Intercontinental railway solutions are on the rise as well.”
Route-wise, he sees Asian routes, both within the region and between Asia and North America and Europe, as the biggest lanes, purely due to market size. He does say, however, that Latin America and Africa could become larger players as production and labor costs in Asia increase.
Even with darkening prospects, Lieb remains confident that airfreight will be of major importance to Schenker moving forward. He declares that a return to growth will occur, at the latest, by the end of 2013. He notes that nearly one-quarter of Schenker’s revenues is derived from airfreight, a mode of transport he calls “a major building block of our sophisticated product offering toward our customers” — words that enforce the importance of airlines to Schenker’s path forward.
But, of course, it won’t be easy. “Ever since mid-2008, the airfreight industry has been a roller coaster ride,” he says. “Unfortunately, after 2010, the market has not yet returned to pre-crisis growth rates, but rather stagnation to small losses.”
The challenges have been targeted, and Lieb has a plan. To return to profitability, he’ll steer airfreight in a few new directions, while maintaining the course in areas where activity will soon return. “Building on our healthcare expertise, which is now organized within a vertical market setup, we will further extend our pharma competence and activities,” he says. “In addition, we are looking into other niche markets, like perishables, which also mostly originate from those regions where we expect the fastest growth rates within the next years.”