DHL Express on the rapidly changing Asian market

By Damian Brett

The express market in Asia is growing rapidly and while that presents an opportunity, capitalising on that growth has its own set of unique challenges in today’s market.

Speaking to Air Cargo News, DHL Express executive vice president, network operations and aviation Sean Wall describes the last couple of years as crazy in terms of growth.

“We’ve got 42 countries in Asia and I would say all of them are growing over double digits,” says Wall. “They’re all growing very fast and they have all recovered from Covid considerably.”

Countries name checked by Wall include China, Vietnam, Australia, Japan, New Zealand, Taiwan, South Korea and Thailand.

Network changes

To capitalise on the demand growth, DHL Express recently started a dedicated service to Ho Chi Minh six times per week – previously it was served on a loop with Penang.

The dedicated service reduces transit times and also adds extra capacity.

Ingrid Raj, vice president of aviation at DHL Express Asia Pacific, says that the route is served with one of the express firm’s A330 freighter conversions, for which DHL Express is the launch customer.

The A330 offers around 62 tonnes of capacity compared with the 50 tonne capacity A300 that was previously utilised on the route.

In addition, DHL Express will upgrade the aircraft shuttling between Hanoi and Hong Kong from a Boeing 737-400 to Boeing 737-800, which will offer greater capacity.

The integrator’s services to Australia have also recorded a steady rise in demand but on this market the company also faced the challenge of the loss of bellyhold capacity, which was used across the express industry to serve the country because it was largely an import market.

“We practically switched it around from pretty much an all commercial airline (CAL) network to a lot of dedicated metal,” says Raj.

The express firm added a B777 flight from Los Angeles to Sydney while demand from Europe and North Asia is served through its Singapore hub, along with any CAL capacity that is available.

A series of new B777 flights connecting with the Asia Pacific region were revealed by the express carrier earlier this year.

DHL Express’ Asia Pacific air network is supported by four main hubs: Central Asia in Hong Kong, North Asia in Shanghai, South Asia Hub in Singapore, as well as a hub in Bangkok. These four hubs link to 50 of the company’s gateways in the region.

Vertical growth

In terms of the industry verticals fuelling the growth, it is no surprise to hear that e-commerce — both business-to-business (B2B) and business-to-consumer (B2C) — is leading the way.

Wall says: “A lot of our big customers now are pretty savvy in terms of their procurement and there is a lot B2B e-commerce demand — we are seeing a big lift in that.”

He adds: “B2C is a massive animal too and we are seeing massive growth in all of our major markets, but especially Australia.”

Two trends driving the e-commerce growth, says Wall, are the switch to online shopping accelerated by Covid and millennial’s gaining procurement roles at big companies.

Sean Wall

Healthcare, fashion and apparel, oil and gas, and high-tech are other growth markets, Wall says, as well as Covid related demand such as PPE and vaccines.

The express sector has also picked up volumes from ocean and air cargo as companies look to catch up following disruption caused by equipment imbalances, port congestion and capacity shortages.

“Some of it stays because our service is good and that is good for us,” says Wall.

Wall says the growth in Vietnam — as well as other countries — is also down to a move away from single-country sourcing.

Capacity crunch

One of the challenges faced by the express sector — and the air cargo market in general — is the lack of bellyhold capacity.

Meanwhile, freighters are in high demand, making it hard to ramp up capacity to meet demand.

Raj says: “It’s important to understand that there is a considerable lag between increase in demand and the time needed to induct additional freighter capacity into the market.

“Typically it takes at least six to 12 months to find additional suitable freighter capacity convert it, bring it into service.

“While there is enough feedstock available, especially our aircraft of choice, which is the A330, there are limited conversion slots available in the market at the moment.

“So that’s something we’re working on. And also, the further availability of the typical medium, widebodied aeroplanes like the B767s are also very limited in their availability.”

She adds: “The only real ready now, freighter capacity is the B737-800 and we are looking to see how we can creatively work with that for Southeast Asia, but we were fortunate to have a lot of A330 conversion slots already in the pipeline.”

Ingrid Raj

Raj adds that now is an excellent time to pick up feedstock: “There’s certainly no shortage of that at the moment,” she says.

On the intercontinental market, Wall points out that DHL Express ordered 14 new Boeing 777F, with 10 delivered by end 2020 and the remaining four to be taken into service in 2021. In January 2021, DHL ordered an additional eight new Boeing 777 freighters with first deliveries scheduled for 2022.

He says: “We were well ahead of the curve with the B777 programme and that was the that was conceived even before Covid.

“That was part of our master plan for the future, not only for capacity, surety and reliability, but also to make sure that we’re a good CO2 citizen.”

Looking ahead, Wall is not expecting the capacity shortage to be quickly resolved.

“I think air cargo capacity will come back, but for us, we won’t be tied to it too much, except for some lanes,” he says.

He explains that having access to its own metal has helped keep costs down as prices have soared due to the capacity shortage – particularly with a very busy peak season expected.

Raj adds that volumes will continue to grow while bellyhold space is gradually re-introduced into the market, which should keep capacity tight. Dedicated freighter lift will therefore be essential.

Green credentials

The environment is another topic high on the aviation agenda at the moment.

Wall says that customers are increasingly asking about DHL Express’ green credentials.

As part of its new sustainability roadmap, Deutsche Post (DP) DHL Group is investing €7bn in green technologies, such as sustainable aviation fuel, to help it further reduce its Co2 emissions over the next ten years.

DP DHL has also set the target of achieving net zero emissions by 2050.

“We’re using sustainable aviation fuels (SAF) and building out the last mile delivery network with all-electric vehicles in our fleet,” says Wall.

He adds: “When we build new facilities we want to make sure that we have proper wastewater programmes, we have solar panels and green energy.”

The company has also been renewing its fleet with modern and fuel efficient freighters. The B777, for example, reduces CO2 emissions by 18% compared with the legacy B747-400s. 

The express firm’s SAF programme is also underway with flights using the fuel from Schiphol and San Francisco.

“We are currently looking to up the purchase for more of this in other parts of the world,” says Raj.

“I think the biggest challenge we currently face is availability as there is more demand than supply.

“We will continue to invest in the latest technology, the most fuel efficient aircraft, but also using technology to ensure that we achieved the ideal weight and balance of the aircraft because that burns less fuel.”

On the possibility of launching SAF powered flights from Asia, she adds: “We’re still in the process of being able to lock in the Asia fuel supply, but we are actively engaged in discussions.”

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