DHL Express is seeing strong air volumes despite the uncertain world economy, has “best-in-class”load factors on its ‘virtual global airline’ and is looking to add more flights to increase
capacity, Charlie Dobbie, Executive Vice President Global Network Operations, told CEP-Research ina wide-ranging exclusive interview this week.Speaking at the DHL Express head office in Bonn, the New Zealand-born operations chief alsostressed that the company is “very satisfied” with its mix of aviation partners which providededicated air capacity for DHL’s worldwide express network, and will continue to graduallymodernise the fleet.
Commercial capacity agreements with other airlines still represent a high proportion of theDHL Express network, however, Dobbie pointed out. “We have not changed our strategy. We use a lotof commercial airlines and use over 1,500 commercial flights a day. That’s still very big for us.Where commercial uplift does not work, then we have our own airlift,” he explained.
Under its ‘virtual global airline’ strategy, DHL Express has formed financial joint ventureswith Lufthansa Cargo (Aerologic), Atlas Air (Polar Air Cargo) and Cathay Pacific (Air Hong Kong) inrecent years to provide dedicated flights on key trade lanes such as Europe-Asia, transpacific andintra-Asia, has acquired several own planes for transatlantic flights, and has major ACMIagreements with cargo carriers such as Southern Air and Kalitta Air.
“This combination forms our ‘virtual global airline’,” Dobbie said. “It works very well forus and we are very happy with it. We are not planning any changes to the joint ventures.” DHLExpress has now over 250 aircraft, including 161 jets, operating dedicated flights around theworld.
“The big growth in the last few years has been on the intercontinental side. We have grownfrom traditional blocked-space agreements to 28 large freighters,” he pointed out. These includeB747s operated by Polar Air and Kalitta Air, B777s operated by Aerologic and Southern Air, andB767s operated by DHL Air UK.
DHL does not really have any ‘gaps’ in its intercontinental network to fill, and new flightstend to represent service improvements or capacity addition, Dobbie said. “The intercontinentalnetwork is very solid and we have the major lanes covered. Going forward, I would see additionalcapacity and service improvements.” The new B777 round-the-world flights with Southern Air, forexample, improved transit times to and from the US West Coast, he pointed out.
Discussing current market trends, Dobbie said: “Our volumes are growing. Kilograms andshipments are increasing, and most lanes are growing.” In terms of world regions, volumes in Asiawere increasing but there was some pressure on yields, however, he admitted. “In Europe loadfactors are above 70 per cent and all areas are consistent. At this point, we have not seen anysignificant slowdown trend.”
Dobbie also highlighted DHL’s “best-in-class” load factors of more than 70 per cent comparedto 50-55 per cent for cargo airlines in general and a 70 per cent average for the world’s top 10cargo airlines. “We have kept our load factors above 70 per cent globally, while doubling capacityon our intercontinental network in the last few years,” he commented. “That results from matchingcapacity to volumes, and maintaining stable costs per kg.”
Air cargo sales, referring to marketing spare capacity to freight forwarders, remains animportant activity, Dobbie added. DHL Global Forwarding (DGF) is the major capacity purchaser andDHL Express has grown to become DGF’s third-largest capacity provider, he pointed out.
Asked about the strength of DHL’s worldwide air network compared to FedEx and UPS, theworld’s two largest cargo airlines in terms of FTKs, Dobbie responded: “We are very competitivelypositioned, we fly the right lanes, and I would argue that our global network is superior in someareas.”
The operations boss also praised the overall quality of all the international expressoperators. “There are very few global players. The competitors are good, and that is good for theoverall reputation and quality of the express industry,” he commented. In view of the trend forsome customers to switch from air freight to sea freight transportation, this could also encouragemore customers to use air express in future, he added.
At a regional level, DHL Express takes a diverse approach to its aviation network dependingon market requirements.
In Europe, its largest region in revenue terms, 87 planes, including 59 jets, currentlyoperate intra-Europe routes to about 80 destinations. Some 55 flights a day operate to and from theLeipzig air hub, which handles about 90 per cent of European shipments, but there are also directflights between several sub-hubs. Under an ongoing fleet modernisation, DHL is converting 18A300-600 passenger planes bought from Japan Airlines to freighters to replace 13 slightly smallerA300B4s that are up to 30 years old.
“In Europe we fly as necessary. We fly or truck to meet the service requirements for end ofday pick-ups and next-day deliveries,” Dobbie explained. In contrast to TNT’s European air networkdownsizing in recent years, DHL has expanded to focus on next-day deliveries. “Our availablecapacity within Europe has actually increased in the last few years to serve intra-Europe flows,European exports and Asian imports,” he pointed out. “We have volume growth in Europe.”
In the Americas, a total of 64 planes fly US domestic and international regional routes.Dobbie played down the likelihood of any direct DHL flights to Brazil in the near future due toinsufficient two-way volume flows and operational challenges for onward distribution in SouthAmerica. “Latin America works well through Cincinnati, Panama and Miami, and with commercialairlift. I don’t see big long-haul daily flights into Latin America,” he commented.
In the Middle East and Africa, where 32 aircraft currently fly for DHL Express, the companyis looking to expand in response to rising volumes and new trade flows. “We are adding capacity toboth the Middle East and Africa at present. We are upgrading aircraft and adding capacity, and willcontinue this for the next couple of years,” Dobbie disclosed. One plan is to operate intra-Africawide-body planes to the regional hub at Lagos, Nigeria, in addition to the intercontinentalcapacity that is already operating into Lagos. “We are also looking to upgrade the East Coast (ofAfrica) to have larger capacity.”
In Asia Pacific, 23 jets fly intra-regional routes for DHL Express at present. Air HongKong, with a fleet of eight A300-600s and three leased B747-400s, is the major carrier, connectingthe Central Asia hub in Hong Kong with destinations in China, Japan, South Korea, Taiwan andsouth-east Asia.
