‘Mature’ French market belies trade growth
France has emerged from its economic lull, according to the government, which has upped the 2004 GDP growth forecast to 2.3%. But business leaders are finding it hard to square the country's new position in the front rank of EU economies with their still struggling bottom lines.
"The finance minister talks about 2% growth, " says Geraud de Chantérac, VPof GeoPost's French arm, Chronopost France. "We've talked to all our competitors and we don't know where that figure comes from."
Imports are one area of the economy that has surged, forwarders say, increasing the imbalance of flows between France and the Far East in particular. However, despite the shift, France still achieved a trade surplus of t1.1bn in the first half, according to finance analyst Dun and Bradstreet.
The transport industry has sucked in imports, particularly aeronautics bound for Airbus's facility in Toulouse – a manufacturing epicentre that is forecast to increase the region's population by 0.5m between 1999 and 2030.
Growth has also been driven by economic reforms.
Responsibilities for national roads and many ports and airports will be decentralised and discussions are also set to re-open on ways to make the 35-hour working week more flexible.
But the state still plays an important part in the economy. The railways remain a state monopoly, and SNCF's tentacles reach into express and logistics services as well. And business leaders say employment legislation makes it difficult to change industry structures.
Express operators facing little vitality in the domestic market are targeting international services for growth.
"The domestic market is very mature, " says Eric Jacquemet, MD of TNT France. "But the international market is growing by more than 5% a year and we are growing at an even faster rate." TNT is the third largest operator in France's international express market, just below Chronopost's 18.5%. DHLis the clear market leader, with 36% of the market.
"The proximity of our depots and our knowledge of our customers is a very good lever for us to develop our international services, " Jacquemet says.
TNT obtained a strong foothold in the domestic market by buying Jet Services in 1999.
"Jet Services was rebranded as TNT on 1 January and next month the 3,000 vehicle ground fleet and some sub-contractors' liveries will start being changed, " he says.
"The competition came to France, bought companies and destroyed their cultures, " he points out. "We have kept our customers, so we have a strong domestic platform to grow our international business." Alain Chaille, southern Europe VPat FedEx, is also targeting international services by paying its strongest card of an extensive US network offering next-day delivery by 10.30am across the US with a cut off of 6.30pm the previous evening.
Although he admits the French economy has been soft for the last two years, Chaille is also seeing more and more standard traffic converting to express.
"Having our hub in Paris helps a lot, " he says. "We can offer a 10.30pm cut-off time for Europe." FedEx launched flights linking CDG with Warsaw, Budapest, Prague and Shannon at the beginning of the month, which will take its next-day-by-noon product into the edges of the enlarged European Union.
With a cap on night flights from Charles De Gaulle airport, Chaille says the company is working hard to adapt its network.
"We are working with the French government, with ADP[Paris airports'operator] and we also have a good partner in Air France, " he says.
The company has a deal with Chronopost, which is owned by La Poste group, to deliver Chronopost packages worldwide. In return, Chronopost provides local delivery services in parts of France and Belgium.
But Chaille says the company is extending its own coverage where demand allows. "Where there's a high density of customers, we do our own pick-up and delivery.
We will be adding Montpelier this October." Géraud de Chantérac is not concerned about the evolving relationship between the companies. "FedEx wants to be present in the big cities, whereas we are everywhere in the French territories, " he says.
Chronopost is the leader in the domestic market, with TNT on its heels, says de Chantérac.
It is able to take advantage of GeoPost's European air network and co-loads aircraft with La Poste's priority service, which has 16-17 planes available for national deliveries.
In the domestic market, de Chantérac says Chronopost is constantly innovating and the next task is to "push information" in the direction of the customer.
"The fastest growing sectors are healthcare, pharmaceuticals and special services, " he says.
Mark Boudier, executive VPat Air France Cargo, has a lot on his hands with the KLM merger. The two companies have released their first joint results.
Capacity exchanges and scheduling alignments are already underway, saving t8-10m between 1 June 2004 and 31 March 2005.
Air France has announced its withdrawal from Singapore to be replaced by a KLM service from 1 November.
The next stage of a fully integrated approach will start in the middle of next year, he says, and the company is already canvassing the views of its customers.
"We have a plan to see the big guys and also the 'local heroes'– the customers on which we rely, " says Boudier.
"We have to create a new model to help us stay in the game against the growing power of the integrators and US and Asian operators." Sky Team, Air France's global alliance, was a late starter but a fast runner, Boudier says.
"In Sky Team Cargo, we've built a model on a common product line, " he adds.
"Members have to adopt a portfolio of products and a point of contact. This has cemented our alliance." The product range includes Equation for express;
Cohesion for tripartite traffic (for forwarders and shippers) and Equation Heavy, for increased weight shipments.
Equation is "booming" and now represents 11% of Air France Cargo's business.
Together, the Equation and Cohesion products have grown to 20% of turnover from just 5% four years ago, he adds.
Boudier's main challenge – apart from the merger – is tackling the imbalance in flows between Europe and the Far East and the long-term threat of higher fuel prices.
"Our increase in costs is higher than the fuel surcharge, " he says. "We cannot continue making a loss on fuel and we are in talks with shippers and forwarders about making the rules on surcharges more transparent."
Posted: 20/09/2004
