US integrators boost air freight services outside home turf

UPS and FedEx have expanded their air freight services, predominantly in Asia. Rival DHL, meanwhile, is facing calls for a retreat from the US.

FedEx is out to get a larger share of the intra-Asian air freight market. On January 10, the integrator launched an economy door-to-door service for shipments between 10 markets in the region as well as for exports from these areas to North America and Europe.

The new “International Economy” offering is a day-definite product with transit times that are typically one or two days longer than the FedEx’s premium service. On intra-Asian legs, this means usually two business days, whereas shipments to the US or major European centres take three to four business days on average.

At this point, the service is available in Australia, mainland China, Hong Kong, Japan, South Korea, Malaysia, New Zealand, Singapore, Taiwan and Thailand. In March, FedEx plans to extend it to Indonesia, the Philippines and Vietnam.

Small to medium-sized companies are the main target group of the new offering. According to the integrator, the product addresses the needs of customers in Asia who look primarily for reliability and cost efficiency.

Individual packages must weigh 68 kilos or less, but there are no weight restrictions on multi-piece shipments. The service includes Customs clearance and a money-back guarantee.

UPS has overhauled its international air freight portfolio, with the emphasis on markets outside its US home turf. The new line-up, which features three products, is a move to integrate the company’s air freight services into a single portfolio along the lines of its express parcel set-up.

Rival DHL is facing a bigger challenge to get its house in order, according to major Wall Street firms. Over the past couple of months, Bear Stearns and Morgan Stanley both released studies that characterised the express outfit’s foray into the US market as a loss-making disaster with no black figures in sight. UPS and FedEx have expanded their air freight services, predominantly in Asia. Rival DHL, meanwhile, is facing calls for a retreat from the US.

FedEx is out to get a larger share of the intra-Asian air freight market. On January 10, the integrator launched an economy door-to-door service for shipments between 10 markets in the region as well as for exports from these areas to North America and Europe.

The new "International Economy'' offering is a day-definite product with transit times that are typically one or two days longer than the FedEx's premium service. On intra-Asian legs, this means usually two business days, whereas shipments to the US or major European centres take three to four business days on average.

At this point, the service is available in Australia, mainland China, Hong Kong, Japan, South Korea, Malaysia, New Zealand, Singapore, Taiwan and Thailand. In March, FedEx plans to extend it to Indonesia, the Philippines and Vietnam.

Small to medium-sized companies are the main target group of the new offering. According to the integrator, the product addresses the needs of customers in Asia who look primarily for reliability and cost efficiency.

"We believe there is a clear demand for a service that lies between our premium International Priority express service and the regular postal service," said David Cunningham, president of FedEx Express Asia Pacific. "Our International Economy service meets that need for customers and at the same time broadens the portfolio of shipping options that FedEx offers."

Individual packages must weigh 68 kilos or less, but there are no weight restrictions on multi-piece shipments. The service includes Customs clearance and a money-back guarantee.

UPS has overhauled its international air freight portfolio, with the emphasis on markets outside its US home turf. The new line-up, which features three products, is a move to integrate the company's air freight services into a single portfolio along the lines of its express parcel set-up.

"By re-inventing our international portfolio, we wanted to achieve three goals. First of all, we wanted to simplify the service options for our customers. We had five products, which we have now shrunk to three, which has reduced some overlaps.

"Second, we wanted to better align our asset and non-asset-based networks, and third, we wanted to make air freight easier to access and use for our small package customers," a company spokesperson said.

This would bring a big advantage to small and medium-sized enterprises, which are increasingly shipping cargo internationally, she added.

Top of the line is "Express Freight'', which provides a guaranteed, time-definite service to major global metropolitan areas. Transit times range from overnight to three days door-to-door, including Customs clearance. The number of lanes covered by such an express option was more than tripled, with the number of countries rising from previously 40 to 51.

According to the UPS spokesperson, the product now covers 61 percent of the total international air freight market.

She added that most of the lane additions were made in markets outside the US, citing Germany-Japan and China-India as examples.

The other two services in the revised line-up are "Air Freight Direct'', an airport-to-airport service with transit times from one to three days, and "Air Freight Consolidated'', which takes three to five days airport-to-airport. Both are available worldwide and offer pick-up, delivery and Customs clearance as additional options.

"I think this is primarily a move to get their house in order," said Albert Saphir, an Atlanta-based industry analyst and consultant. "After the Menlo acquisition, they had a somewhat confusing array of products."

Rival DHL is facing a bigger challenge to get its house in order, according to major Wall Street firms. Over the past couple of months, Bear Stearns and Morgan Stanley both released studies that characterised the express outfit's foray into the US market as a loss-making disaster with no black figures in sight.

The former, which issued its report late last year, had previously projected that DHL would break even in the US by 2012 but now reckons this outcome highly unlikely. In the interest of shareholder value, DHL should withdraw from the domestic US express market, Bear Stearns suggested.

Morgan Stanley, which published its report in early January, came to similar conclusions, advocating that DHL hand over its domestic US business to another company.
Spokesmen for DHL and parent company Deutsche Post World Net insisted that a retreat from the US market was not on the cards.

"The US is an important market in our commitment to offer a truly global service network," a company spokesman stated. "The US is strategically important to the group both as a stand-alone market and as a high-performance extension of our global service platform.

"Since 2003, we have invested more than USD 3 billion in the US, including over USD 1.2 billion in infrastructure and distribution, creating a vastly expanded domestic shipping network that allows us to delivery competitive services in the US," he said, adding that the company's performance in other regions also depends on its strong presence in the US.

With the US economy in rough waters, the outlook for DHL is challenging.

Meanwhile, FedEx, which blamed the weak US market for a six percent drop in net profit and an 8.3 percent decline in operating margin in the quarter that ended November 30, predicts a decline of up to 15 percent in profits in the December-February period, mostly because of its home market.