DHL Express builds up Chinese domestic business

DHL Express is cautiously building up a domestic Chinese express business to profit from thecountry’s dramatic growth and will decide on the future of other domestic businesses around the

Following the dramatic exit from heavily loss-making businesses in the USA, UK and France overthe last couple of years, DHL Express now has a clear focus on its core international products,Charlie Dobbie, DHL Express Executive Vice President Network Operations, told internationaljournalists in Leipzig this week. The operator had divested unprofitable domestic businesses,reduced costs and improved service efficiency.

This was paying off with better financial results, he said. In the first quarter of 2010, DHLExpress increased revenues by 9% and turned the previous year’s underlying EBIT loss of €120million into a €154 million profit.

Following an upturn in late 2009, volumes have continued to rise month by month into 2010,Dobbie said. Over the first five months of the year, daily international shipment volumes wereabove 2009 levels, although still below those of 2007 and 2008. “We are optimistic but we are notsaying it is a trend,” he commented. “We are a long way from the volumes of previous years.”

DHL Express was satisfied with its US export volumes, which were better than budgeted followingthe domestic market exit, Dobbie said. The operator is covering the world’s largest express marketthrough a network of more than 100 terminals concentrated in the main US metropolitan areas, whichgenerate the overwhelming bulk of international business, he pointed out.

Asked about DHL Express’ general strategy for its domestic businesses, Dobbie said that thesebusinesses are evaluated on a case-by-case basis that varied from country to country.
Key criteria are “does it complement the international service? Is there customer crossoverbetween domestic and international?” he explained. “The UK was not supportive of the internationalproducts, and the crossover of customers was very small.”

But DHL Express has some very strong domestic businesses such as in Spain, India and Mexico, theveteran manager pointed out. In Mexico, for example, the company would invest in a new hub. InScandinavia, where the freight business was transferred from the Express to the Freight division,the move has been very successful so far, he added.

Asked about the little-publicised acquisition of a Chinese domestic express company, ShanghaiQuanyi Express, by DHL-Sinotrans last year, Dobbie explained that DHL Express had decided to enterthe Chinese domestic market. “We are putting investment into a domestic business,” he confirmed. “The move into the domestic arena is a logical step given the size of China. We think we should bein the domestic market.”

Through the DHL-Sinotrans joint venture, DHL Express is now “quietly” building a nationalnetwork and focusing on premium domestic express shipments. The DHL-Sinotrans domestic activitieshad been merged with Shanghai Quanyi Express as a start-up organisation, and further acquisitionscould follow. “We will see what is needed. It could be a mix of growth and there could beopportunities for acquisitions.” But experience made the company “hesitant” about acquisitions dueto integration issues, he commented.