DHL gives Transmile chance to rebuild reputation

DHL is maintaining its business relationship with loss-making Transmile Group Bhd, which was hit by massive accounting irregularities, and wants to give it a chance to turn around and rebuild its reputation.

DHL Asia Pacific chief executive officer Daniel McHugh said the leading courier services provider still has a “good, open relationship” with Transmile, and was in talks weekly on the challenges both companies faced. “Discussions go on every week with Transmile on how we operate our network, and how they operate their network.”

McHugh said DHL had a long-term business relationship with Transmile and it was willing to give the latter a second chance to rebuild its reputation, as it had done so with US-based Northwest Airlines.

Northwest was one of US’ largest carriers when it filed for bankruptcy, as earnings were affected by intense competition from low-cost carriers, increased labour costs and the aftermath of the September 11 terrorist attacks. It emerged from bankruptcy in May this year.

Transmile plunged into the red and it had to restate its financial accounts after massive accounting irregularities were revealed this year. It posted net loss of RM44.93 million in its third quarter ended Sept 30, 2007 due to lower charter revenue, provision of bad debts and higher fuel costs. Its directors said they would continue to evaluate various strategies to improve Transmile’s operational performance and financial position.

Transmile provides express air cargo service to DHL, its single largest customer. It has said that DHL is expected to contribute almost half of its revenue from July 2007 to June 2008.

McHugh added Transmile was a component of DHL’s global aviation strategy by operating in multiple sectors in Asia. For instance, it undertook short haul flights, including the Bangkok-Singapore, Singapore-Jakarta and Beijing-Hong Kong routes.

He said China and India, which emerged as Asean’s powerful neighbours, had caused rapid changes in the latter’s trade patterns. He was commenting on the findings in an Economist Intelligence Unit report that the amount of trade between Asean countries fell to 20.9 pct in 2006, compared with 22.4 pct in 2000.

The report found that China and India’s high-value exports and imports grew faster than low-valued ones, compared with Asean, in which four out of six countries surveyed saw low-value exports grow faster than high-value exports.

McHugh said: “Asean is at the crossroads. We have seen in the last few years, the relative trade has shifted from Japan as the largest exporter in Asia, Asean as the second and China the third.

He said China was supplying high value electrical components or medical devices, which were once the key exports of Malaysia, Thailand and Singapore. Asean was facing mounting pressure to enhance its competitiveness.

Despite the competition from China and India, many companies would still retain their businesses in the Asean countries.

DHL would continue to invest in the Asia-Pacific region, to tap into increasing trade flows between the continent and the US and Europe. he said.

DHL had recently announced its decision to invest US$175 million on a hub in Shanghai Pudong International Airport, its second in the region, to provide better connections between Asia and the US, as well as Europe.

“The second hub in China will complement our operations in the Asia-Pacific region, including our Southeast Asian network,” he said, adding that DHL planned to continue investing in its over 50,000 employees in Asia,” he said.