K+N: Forget Air Cargo Peak Season This Year

Forget the traditional fourth quarter peak; there will be no upturn in air cargo markets for the next three quarters, according to  Kuehne + Nagel International KNIN chief executive Detlef Trefzger.

"At the moment I would say that the decline will not stop this year…or the first two quarters in 2020," he added. "I would assume that next year we might have a flat market versus 2019.

"What happens then in 2021 and following years we will have to see; it's too early to say."

Speaking during a 22 October conference call with analysts after the Switzerland-based forwarder announced a downturn in its third quarter 2019 air freight performance, he said only growth in global gross domestic product (GDP) could provide the trade expansion momentum sufficient to persuade shippers to use air freight for more shipments.

However, he also noted that bearish air freight markets in 2019 should be viewed in context. "2018 was an exceptional year," he said. "We saw growth in our network of 20% and more, organically. Which is also not normal."

By contrast, in 2016 and 2017, 2% market growth and 4% to 5% growth for K+N was viewed as normal. "So, obviously markets have to rebalance again," he added. "And for sure (the weaker performance of air freight markets this year is) also a reflection of all the trade discussions and trade noise that are ongoing."

As reported in FreightWaves, K+N's ocean freight and land transport units both made third-quarter gains, helping to offset the downturn in air freight markets.

The Swiss logistics giant's third-quarter earnings before interest and tax (EBIT) rose 16% year-on-year to CHF283 million ($287.2 million), while net turnover fell 1.1% to 5.23 billion Swiss francs in the period.

K+N was the world's second-largest global third-party logistics provider after DHL Supply Chain & Global Forwarding by revenue last year, according to Armstrong & Associates. And despite the downturn in air freight, its results for the first nine months of 2019 suggest it is well on its way to maintaining that position this year as well as reaffirming its position as the world's largest ocean forwarder.

Net revenue of CHF15.8 billion over the period was 3.1% higher than a year earlier, while EBIT rose 6.6% to CHF794 million. The forwarder said organic net turnover growth amounted to 4.3%, foreign exchange effects had a negative impact of 2.9% and acquisitions had a positive effect of 1.7%.

"Against the backdrop of consistently tense global markets, Kuehne + Nagel once again delivered very solid results," said Trefzger. "In Seafreight and Overland in particular, our focus continued to be on customer service, cost efficiency and digitalization."

Seafreight, K+N's key revenue earner, saw an increase of 7.3% year-on-year to CHF5.6 billion in the first nine months, with EBIT up by 10.2% year-on-year to CHF357 million over the same period.

"Seafreight posted a very solid net turnover growth and once again improved its performance in the third quarter," said a K+N statement.

"Kuehne + Nagel grew significantly in a stagnating overall market and, with 3.67 million standard containers (TEU), the group transported 152,000 units more than in the same period of last year (up 4.3%)."

The company said the main success drivers of its Seafreight unit were a "selective growth strategy" and "effective cost management."

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