European express customers have been spared the possibility of significant price increasesresulting from a US-style duopoly, thanks to the actions of the European Commission over UPS’s
planned takeover of TNT Express, shipper representatives told CEP-Research today.Joost Van Doesburg, policy manager for the European Shippers’ Council (ESC)’s Air TransportCouncil, said in an exclusive interview that the large shipper members of the national associationsmaking up the ESC were “very clear” that the integrator market should be treated as separate fromEurope’s national and regional parcel and express operators because DHL, UPS and TNT were the onlycompanies currently capable of providing the highest level of international express services withinEurope.
Van Doesburg, who is also head of European affairs at Dutch shipper association EVO, said theESC and its national and shipper members were involved in the EC’s investigation of the competitionimplications of the proposed takeover, after being invited by the EC to participate “as astakeholder, as a representative of shippers. So they were interested in listening to us, in whatour view was, but they also asked us to provide the contact details of big users, the bigshippers.”
As well as providing these contact details, the ESC and its member associations also helped tomake sure that the big shippers filled in the surveys that the European Commission provided for itsinvestigation into the case.
“I can be very certain that the shippers had a clear vision. I organised some meetings withshippers, and they were very clear; they were very concerned about competition in the expressmarket,” he added. “We at the ESC, and the national shippers’ councils, have one very importanttask: to ensure that the competition level in the transport markets, including the express market,stays at a certain level, where price is determined by competition between the logistics serviceproviders, instead of too few players on this market.
“The big question of the European Commission was how do shippers and the ESC see the market? Dowe see the European market as a market of three integrators or of a dozen express providers, andour members and the European Shippers’ Council were very clear: we need to see the market on onehand as three integrators, and that their service is a completely separate service than that whichother express companies provide, such as DPD and GLS.
“The issue was not that we were against this merger; we were against the situation wherecompanies become too powerful. In the end the European Commission said that this company willbecome too powerful if they merge as a whole, and so they were forced to sell certain activities,major activities. And in the end they pulled the plug themselves.”
According to Van Doesburg, shippers said that the clear difference was that there were onlythree companies in Europe, UPS, TNT and DHL, providing “high-service products”, with all the othersproviding low- and medium-service products.
“These shippers also remember what happened several years ago when DHL exited the American[domestic express] market, and in one year the transport rates increased very significantly, and itwas against market developments that rates increased by such a high percentage,” said Van Doesburg.He said shippers still think that the competition level in the US express market is insufficient,with negative consequences.
“It is also because it is very difficult to create a real integrator,” he added. “Companies likeDPD and GLS may need more than a decade to become a real integrator, if they start investing fully,and currently that is simply not possible.”
As well as requiring a lot of capital to set up or buy an airline, it would be a huge challengeto acquire the knowledge and systems to operate such a complex network, said Van Doesburg. “Everyone knows it’s very difficult to make money flying cargo,” he observed.
Despite the difficulties of the aborted sale, Van Doesburg believes TNT Express can stilloperate as a successful and significant competitor in Europe to UPS and DHL.
“We definitely have a feeling that TNT is still a very good operator for the European market,and so we’re not worried about their activities in Europe,” he said. “We don’t know what willhappen in the near to medium-term future.”
Observers in Europe believe there is still the potential for a purchase of TNT Express by FedEx,which would be likely to get European Commission approval because of FedEx’s relatively smallpresence in Europe compared with DHL and UPS, although it is thought that TNT would be unlikely toachieve the same sale price as that which had been offered by UPS.
