Interview – DHL Express invests in Americas growth

DHL Express is investing strongly in its network in North and South America and remains “cautiously optimistic” about growth prospects for markets such as the US and Brazil this year,

The company has invested nearly $180 million in the region in recent years, including the recent$105 million expansion of the North America air hub at Cincinnati and a $20 million expansion ofthe Latin America hub at Miami airport, along with new facilities in Mexico and Colombia. Furtherinvestments lie ahead, including an expanded facility in Chile and new facilities in the Braziliancities of Rio de Janeiro and Sao Paulo, the long-serving manager said.

DHL Express’s revenues in the Americas region increased by around 20% last year to more than€2.2 billion, due in particular to good business in the USA and Mexico. The company says itsAmericas region market share grew to 16% in 2011, with FedEx and UPS holding about 50% and 30%respectively.

This year, market prospects are more uncertain with trends such as downtrading by customersplaying a role. “There’s a big shift from general air cargo to sea in the market. In the past thisdrove the high end of the air cargo market into express. I think this will happen again,” Fenwickpredicted. He added: “I’m probably more optimistic than many people. I think we will get throughthis year ok and Latin America will be a big growth area in the next 5-10 years.”

In the USA, DHL Express claims to have won international express market share after revenuesgrew by a third to more than €1 billion last year, far outpacing the moderate overall marketgrowth. “We are seeing double-digit growth in the US and we see that growth continuing,” Fenwicksaid.  The USA remains one of the most important markets due to its sheer size, its role as aninternational exporter and as a consumer market for imports, he pointed out.

But the US market outlook is difficult to judge, he warned. “We are cautious about the marketsituation. Customers are cautious and are holding back investments this year. However, the greatestissue is not whether it will get better or worse, but it’s the uncertainty.”

DHL Express is also profiting from the cross-border e-commerce boom out of the US, Fenwicknoted. “Canada is a huge inbound market for us. It’s growing dramatically with B2C.” The new dailyflights via Tokyo to Australia are also serving the flows of high value small consumer goods andfashions. “There is a lot of B2C out of the US to Australia,” he confirmed.

South of the border, Mexico has grown dramatically in importance as a member of NAFTA and is nowone of DHL’s ten largest express markets worldwide. “We are seeing further development inmanufacturing in Mexico, not only for the US market but also for the middle class in the country.In addition, there is a lot more discussion about Mexico serving South America, for example in theautomotive sector. In the past, Mexico was seen as a competitor to China but perhaps it is morecomplementary now,” Fenwick commented.

DHL is in the midst of a $160 million five-year investment in Mexico, and has opened variousfacilities there, including a $35 million new domestic ground hub close to the capital. “We haveinvested a lot of money in Mexico, including in security. It’s a growing market and there is aclear opportunity for Mexico in the future,” he said.

DHL is also expanding its network in Brazil despite the slowdown in economic growth over thelast year and the recent outbreak of social unrest. Asked about the impact on business from themass protests, Fenwick said: “The immediate impact is from customers not getting to work. There isno dramatic impact at present but there is some disruption of service.”

The Brazilian market is different to others in the region, he stressed. “Brazil is more of adomestic market and has not grown so much internationally as, for example, the Asian countries. Butwe are in there for the long term and growth will come in time.” According to observers, Brazilianexports remain hampered by weak demand, red tape and poor infrastructure. Fenwick admitted that “outbound is a challenge” but emphasised “what’s important is getting the imports flowing.”

DHL is making two key moves in its Brazilian infrastructure. It is enhancing its internationalgateway at Rio de Janeiro and plans to open a gateway at Sao Paulo’s Viracopos airport incooperation with airline partner Atlas Air at the beginning of next year.

Fenwick was bullish about several other countries in South America. “Chile, Colombia and Peruhave done pretty well. We see these countries growing strongly in terms of imports and exports. Weare very comfortable investing in these countries.” But business in Argentina has been held back bythe country’s import restrictions.

In Colombia, DHL opened an international gateway at Bogota airport last year, investing €1.3million in the new facility to speed up imports and exports. In Chile, a new head office has beencompleted in Santiago and is due to be officially opened within the next few weeks.