TNT is understood to be in “advanced talks” with at least two potential buyers for itsLiege-based airline TNT Airways as part of the planned takeover of TNT Express by UPS, which as a
US company is not permitted to own more than 49% of an EU airline.A spokesman for TNT Express today confirmed to CEP-Research that the company’s intention to sellTNT Airways had “been known for some time”, but he added: “We have been working on a solution totransfer ownership and control of TNT Express’ airlines to ensure that they can continue operationsafter completion of the UPS offer, in compliance with EU airline ownership and control rules. Talksare progressing but we will not comment on details regarding the parties nor any otherdetails.”
The Wall Street Journal (WSJ) today reported that talks with at least two potential buyers wereat an advanced stage, although they had become complicated by concessions UPS and TNT Express mayhave to make to win approval from European competition regulators. The WSJ said potentialbuyers included private-equity firms and General Logistics Systems (GLS), Royal Mail Group’smainland-European parcel delivery subsidiary.
The WSJ said potential buyers were being asked to continue providing UPS with service for a yearafter the close of the company’s planned takeover of TNT Express, plus also provide commitments tolawmakers in Wallonia, the southern region of Belgium where Liege is located.
GLS told CEP-Research that it did not comment on speculation, and no-one at the company wasavailable at the time of writing to say whether GLS would benefit strategically from a dedicatedair express capability. But a source close to TNT’s Liege operations doubted that GLS would proveto be the buyer.
One former senior executive of GLS also commented that during his time at the company, GLS waspursuing a strategy of cautious organic growth. He told CEP-Research that he also doubted whetherGLS would be able to make such an acquisition under the ownership of Royal Mail, which onlyrecently got state-aid clearance from the European Commission for restructuring funding.
UPS has already stated that TNT Airways needs to be sold before it closes the acquisition of theparent company, in order to comply with airline-ownership rules. The European Commission is due toreport in January on the outcome of its investigations into possible competition issues regardingthe merger. UPS CEO Scott Davis yesterday reiterated that he expected the TNT Express deal to closein early 2013, despite the competition concerns raised last week by EU regulators.
At the time of the acquisition announcement in March, UPS executives stressed that TNT’s air hubat Liege was critical and would be kept open in future, although they said UPS’s Cologne hub wouldbe the major European air hub for a combined company in the future.
TNT’s Global Air Network organisation runs two separate operations at Liege airport: TNT Airwaysand TNT Euro Hub. TNT Airways, with 450 employees (including 250 pilots) operates a fleet of around30 aircraft, flying to more than 50 European airports and several non-European airports.
The 75,000 sqm Euro Hub, with around 1,500 employees, sorts some 90,000 parcels (400 tonnes) anight, with about 70% of TNT’s worldwide shipments transiting through Liege. The facility opened in1998 with an initial investment of €62 million and has been subsequently expanded with a further€80 million of investments over the last decade. TNT is understood to have an agreement coveringLiege airport that runs until 2038.
UPS is currently in the midst of a $200 million expansion of its 30,000 sqm European air hub atCologne. This will increase sorting capacity by 70% from the present 110,000 to 190,000 packagesper hour upon completion at the end of 2013. UPS employs around 2,300 people at the Cologne airhub, with a further 200 jobs expected once the expansion is completed. Some 72 flights, bothintercontinental and intra-European, operate every night to and from the UPS hub.
