DHL Global Forwarding hopeful of second-half improvement

B777-200LR. Photo: DHL

DHL Global Forwarding is hopeful that the airfreight market will return to growth in the second half of the year despite the tough start to 2023.

Speaking to Air Cargo News, Thomas Mack, global head of airfreight, DHL Global Forwarding, said that global air cargo volumes were down by around 17% over the first four months.

However, this was something the company had expected as volumes had been returning to ocean freight – following a shift to air caused by box shipping delays – and the surge in IT equipment for home working during the Covid pandemic had eased.

The tough economic conditions and high inflation were also hitting demand, he said.

Mack said that looking ahead to the second half of the year, he expected demand to grow by around 3-4% compared with the same period a year earlier.

He explained that much of the downturn had already had an impact on the market by July and therefore comparisons should start to ease.

Based on this, Mack said that he believed that rates for long-term capacity, as opposed to the spot market, had now bottomed out.

“I believe to a big extent that the rates have bottomed out – that is our personal opinion – and that is based on talking to customers, talking to airlines, macroeconomics and so on.

“I believe that rates have bottomed out for long-term capacity. Short term you always have seasonal fluctuations and that means rates will go down a little bit and then up in the peak season.

“That is my opinion based on the assumption that we see in the second half of 2023 a recovery in the market versus the same period last year.”

Asked how DHL Global Forwarding had reacted to the market downturn, Mack said the company had “significantly” reduced the amount of long-term capacity it had on its books.

He explained that capacity shortages had eased because of the lower volumes and returning bellyhold space, which had reduced the need to lock in capacity on long-term contracts.

“We reduced the percentage share of our long-term capacity to adjust to the new market environment and we started already with that last year in September. That gives maybe an advantage, although we don’t know what our competitors are doing.

“With that comes then of course a higher percentage in the spot market. So, you play the spot market more. But this is not something new, as an airfreight organisation we are used to doing that.”

DHL Global Forwarding benefits from having access to the capacity of DHL Aviation, which operates around 250 aircraft largely for DHL’s express business.

“That is something that we didn’t do before, at least not as concentrated as we do it now. That is for me a clear advantage in regards capacity and providing the customers with dedicated capacity on their specific lanes.”

Mack said that after addressing capacity, the next step to adapting to a changing market is to address fixed costs.

He said any adjustments to fixed-term costs should be based on long-term expectations of how the market develops.

DHL is helped in this by the rollout of new software over the past couple of years that provides improved visibility of each individual branch of the business to better steer resources.

In terms of future investments, Mack said that the company would focus on people, digital and infrastructure.

“Our first priority is always the people, so we are investing a lot of money in training programmes that we have implemented for the last two or three years.

We have a new software and with that comes a new concept of responsibility for an individual employee. As we continue with digitalisation and automation, that leaves more time so operators can take more time to talk to the customers and explore their needs from the customers.

“Expectations of an employee are no longer how many air waybills can you cut in a day, that should be automated, but how many customer contacts do you have and can you help the customer and provide them with value.”

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Damian Brett

Damian Brett
I have been writing about the freight and logistics industry since 2007 when I joined International Freighting Weekly to cover the shipping sector. After a stint in PR, I have gone on to work for Containerisation International and Lloyds List - where I was editor of container shipping - before joining Air Cargo News in 2015. Contact me on [email protected]