DHL chief warns of increase in air freight costs

Deutsche Post DHL, one of the world's biggest logistics companies, has warned that the cost of air freight will rise over the rest of the year as fewer passenger flights leads to "massive shortage" in cargo capacity. "We will see a significant contraction of cargo capacity in passenger planes, which usually accounts for more than 50 per cent of the market supply," said Frank Appel, chief executive of Deutsche Post DHL. "That will be to the advantage of operators like us, who have relatively good access to cargo planes."  Despite the easing of travel restrictions in several countries, most airlines are running a fraction of their usual routes and the industry does not expect to return to pre-pandemic levels until at least 2023.

Deutsche Post DHL, which operates a fleet of more than 250 cargo aircraft in its Express division alone, would stand to benefit from this reduced capacity, Mr Appel said. He added that more passenger planes would be converted to cargo, as several operators look to sell older jets. Even as many large airlines begin to increase their schedules, only 52 per cent of passenger jets are in service, according to research firm Cirium, with more than 12,500 aircraft in storage.

In April, Deutsche Post DHL withdrew its guidance for the year, citing a "lack of transparency concerning the global economic development". However, Mr Appel insisted that the Bonn-based company's business model remained "extremely robust".

We do not have an economic crisis because we have a supply problem, but rather because we have a demand problem

Although it is one of Germany's largest employers, Deutsche Post DHL has only furloughed a small percentage of staff during the coronavirus crisis, managing to redeploy excess employees to busier divisions. Nonetheless, Mr Appel, one of the longest-standing chief executives on Germany's Dax, said it was still too soon to issue a renewed outlook as the shape of the recovery depended on how quickly consumers started spending again.

"We do not have an economic crisis because we have a supply problem, but rather because we have a demand problem," he said.

The 58-year old also revealed that an increase in ecommerce business as a result of a boom in online shopping during lockdowns had helped Deutsche Post DHL reduce its reliance on Amazon, which had previously accounted for 6 per cent of its parcel revenues in Germany.

He said he believed globalisation would continue to accelerate, despite the disruptions to supply chains caused by the pandemic. "It is nonsense to say that global supply chains are going to change," he said. "Customers will not pay for the extra costs."

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