WCA Family Conference Week NOV 13 2009 SERVING THE INDEPENDENT FREIGHT FORWARDING COMMUNITY No.005 MARK Twain once famously said: “reports of my death have been greatly exaggerated”, after hearing his obituary had been published in the New York Journal. The same could be stated by the independent freight forwarding community that, despite the dire predictions by several chief executives at multinational logistic companies, is steering its way through the global financial crisis with much greater success than the global players. Far from ‘consolidate or die’ the independents have seen only a tiny percentage of casualties over the last 12 months. It is now the larger global players that are coming under pressure to consolidate, as shareholders call for action as revenues and profits nosedive. In stark contrast to the predictions of independents losing customers and being driven from the market, the sector has raised its airfreight market share in many key markets according to the latest statistics, including the vital territories of Germany, the US, France, Italy and Hong Kong. WCA members have certainly outperformed the overall market with the majority rising up the league tables in both CASS revenues and tonnages. In ocean freight too the independents have performed well as, with the exception of Kuehne + Nagel, the multinationals have struggled to rapidly take costs out of their business models as revenues declined. It is ironic that at least two of the multinationals that were viewed as ‘invincible’, are now in perilous financial Independents show their strength positions with huge debts and decreasing revenues. Take-over speculation is rife in the market that at least one big name will be swallowed up to survive. As the multinationals battle among themselves and the spiral of ever decreasing pricing – as the huge global shippers sent out tender after tender to force the contract rates lower – independents have stuck to the core values that make them such an attractive proposition to medium-sized and smaller shippers. These values of quality service to shippers and consignees, realistic pricing for long-term stability and the ability to go ‘the extra mile’ for customers is in stark contrast to the multinationals approach of maintaining market share at any cost. In late September a new challenge arose to the forwarding community when Lufthansa Cargo, rapidly followed by Air France-KLM, Delta Air Lines, British Airways and others announced price rise hikes of 20-30 percent. The aim clearly was to milk the smaller independent forwarders to help stem the haemorrhaging of cash the carriers were suffering. Echoing the policy of the multinational forwarders, the airlines have looked to preserve their market share at any cost. There is growing evidence that the major logistic companies are concluding their own deals with airlines with the rises tiny in comparison with the stated strategy. There is a danger that the draconian pricing measures the airlines are attempting to introduce will fall at the feet of the independents. It is noticeable, however, that freight agents are already fighting back against this unfair and unsustainable policy by the carriers. Evidence 10-17 January, 2010 - Bangkok, Thailand unison. It is logical that prices will rise from their historic low, but this should and will not be absorbed mainly by the independent sector. In ocean freight rates have risen too as the reduction in capacity takes hold. However, independents, working closely with loyal shippers, are more able to absorb any rate rises as quality and reliability remain important criteria. Smaller agents never reduced prices to the tiny margins that the multinationals have been forced to absorb, so so far has been mixed as to whether are now in a stronger position than the rate increases have been effectively the multinationals to negotiate with implemented. On some routes rates have customers. risen, especially on the trans-Pacific route The next 12-18 months will remain an into the US. However, on many other incredibly tough business environment. routes the rises have been much more However, independent forwarders difficult to implement and forwarders have proven that the flexibility and can still negotiate heavily on rates. By entrepreneurial spirit, customer service refusing to accept unfair pricing, the and quality they bring to the market, excess capacity that is still in the market combined with the growing strength is dictating that forwarders can still strike membership of the WCA Family provides, a good deal with the carriers. has helped insulate them from the It remains more important than worst of the pain suffered by their global ever that independent forwarders act in competitors.