E-commerce bolsters Geodis capacity
09 / 02 / 2024
Eric Martin-Neuville. Photo: Iannis G./REA
Geodis is scoping out growth, while keeping hold of its freighter capacity as it benefits from strong e-commerce demand.
Geodis will continue with its own-controlled freighter capacity until at least the end of the year.
The freight forwarder’s leased Airbus A330-300P2F, operated by London Stansted-headquartered airline Titan Airways, is currently operating between the UK and China carrying e-commerce goods.
Titan is operating a round-trip cargo route from Chongqing Jiangbei International Airport in southwestern China to London Stansted Airport in the UK three times a week on Tuesdays, Thursdays and Saturdays.
The aircraft will continue to be operated “at minimum until the end of 2024”, says Eric Martin-Neuville, vice president of freight forwarding, Geodis, part of France’s state-owned railway company, Société nationale des chemins de fer français (SNCF).
The aircraft was leased during the height of the pandemic, but the tough market conditions last year resulted in doubt about how the return of capacity and lower rates would affect those in the industry that had invested in own capacity, some with long term contracts.
For Geodis, the volatile air cargo demand, meant it stopped flying between Asia, Europe and the US using its leased A330-300P2F.
Geodis does not yet know whether the lease will be extended, but Martin-Neuville says demand for e-commerce, which the aircraft has been carrying, remains strong and so if not that aircraft, there are other options.
“The likelihood of continuing to fly for similar operations appears very high. Because the aircraft type is very conducive to e-commerce type of goods.”
Geodis is positive on demand for the freighter and is currently “trying to see how we could be able to build a fourth China rotation between Europe and China”.
The company remains open to expanding its own-controlled capacity within its AirDirect own-operated airfreight network if the market presents an opportunity.
“When there is a demand and a way to offer our customers a solution which is not available in the market, we will invest in own-controlled capacity,” says Martin-Neuville.
He adds: “If there is a weakness in the market where our customers are not served the way they should be served, we are duty bound to provide the right level of service and will do so. I think the number of opportunities of this type will be lower (in the current market). It does not mean they will never happen.”
Adding to the capacity offered by the A330-300P2F are chartered flights offered through Geodis’ AirCharter network, established in 2020. Geodis continues to operate two flights [B747] per week between China and Guadalajara [Mexico].
On demand for charter operations, Martin-Neuville says: “Spot charter operations are probably still in higher demand than they used to be pre-Covid.
“Then you have the more long-term controlled network type of activity, which is not going to be probably ever again at the same level of demand as it was during Covid.
“So today it will only be because on specific sectors, there is no service, insufficient services or the service available are not of the right shape or form. The times of abundance with hundreds of such opportunities available as was the case during the pandemic are long gone.”
E-commerce peak
There is room for optimism. The company saw a fourth-quarter peak of sorts.
“There was a rebound in the market which was high enough to be called a peak,” points out Martin-Neuville.
“The main driver was the e-commerce boom, which took a lot of capacity out of the market.”
He adds: “At the same time, you have the traditional peak in the market related to seasonal consumer goods, consumer high tech and new product launches etc. And the combination of the two has created some form of a peak.”
However, Martin-Neuville thinks the market will settle by the end of Chinese New Year, albeit with better year on year comparisons.
“Afterwards, we will go back to a more normal mode with limited demand and a high level of capacity. But year on year, I tend to believe that things will still look better.”
And the biggest challenge for Geodis, says Martin-Neuville, relates to the ups and downs of demand.
“The biggest challenge in general are those absurdly high and low cycles, which we see over the past few years. They make it extremely difficult to permanently adjust supply to the demand level.”
Geodis A330-300 freighter. Photo: Sam Paakkonen
Growth opportunities
Aside from e-commerce, pharma and healthcare are big business areas for Geodis Freight Forwarding and are the verticals that it is investing the most in.
“We have made significant investment in terms of infrastructure. We now have a full network of CEIV certified stations located in all main strategic airports around the world,” says Martin-Neuville. “Those two verticals for airfreight remain the one we are investing the most in.”
Geographically, the Middle East is one area where Geodis would like to expand further.
“We have been present in the Middle East for many years, but the market development in that area demand a scale up.
“We have made significant investments recently. We have opened up in Saudi Arabia and expanded our presence in Qatar and Bahrain. And that will continue.”
Acquisitions and investments within the airfreight division and throughout the business are also a possibility to further the company’s end-to-end logistics solutions ambition.
The logistics and freight forwarding company has a long-term “asset right” strategy, rather than asset light. which it plans to keep focusing on.
“Asset right is not to hesitate but to invest in specific assets, where we believe that they will bring something valuable.”
As pharma has been a growth vertical for Geodis beyond the pandemic due to the need for speed with shipments, last year’s acquisition of German network for temperature-controlled pharmaceutical goods and express premium delivery, trans-o-flex, made business sense.
Completed in March 2023, the acquisition is helping Geodis grow its healthcare business, strengthen its footprint in Germany, and build on its end-to-end logistics goal.
Elaborating on the acquisition of Transoflex, Martin-Neuville says: “We are investing in more asset-based enterprises, because we want to expand our end-to-end offer into additional geographies.”
He adds: “Not hesitating to go into an asset related investment, to bring capabilities we need on a certain market for certain service deliveries is the core of our asset right strategy.
“The same thing with the (A330-300P2F) aircraft and it all comes from the same philosophy which is there is a minimum of assets we need to provide a service our customers need to benefit from, we will not hesitate and the asset right mantra to invest is the right thing to do.”
June 2023 also saw Geodis acquire Swiss forwarder ITS – International Transport & Shipping Ltd., whose operations include a worldwide airfreight network. ITS is based at the airports of Zurich, Basel and Geneva.
“ITS in Switzerland is a bolt on acquisition. We acquired a company in a country where we had no presence,” explains Martin-Neuville.
“We will continue to work towards developing market share in Switzerland.”
He adds that Geodis will pursue these types of acquisitions when there is a perceived “weakness in our network”.
The previous year, in July, Geodis acquired Singapore-based contract Logistics specialist Keppel Logistics.
On this deal, Martin-Neuville says: “In terms of contract logistics capabilities in Singapore, or in Southeast Asia, we have immediately scaled up. And therefore, it does change the way we do business in that geographical area.”
Further, Geodis isn’t ruling out more acquisitions.
“There certainly are chances to continue to grow the company for acquisition. We are permanently looking at a handful of opportunities.”
He suggests one such opportunity may come to fruition this year.
But alongside this, Geodis, like the rest of the industry, is hoping for market stability to aid its growth ambitions.
“The biggest challenge in general are those absurdly high and low cycles, which we have seen over the past few years.
“So we would be very pleased to see some form of stability within the environment we work with.”
