Economy

With Bid For TNT, Parcel Giant UPS Sets The Stage For Industry Power Shift

Amsterdam-based parcel delivery company TNT Express is struggling and looks ripe for a takeover. American giant UPS has already made a bid. TNT has refused the offer, but it may just be a matter of time before UPS – or its arch rival, FedEx – scoops it up

TNT, a Holland-based express delivery company, could soon lose its autonomy (vauvau)
TNT, a Holland-based express delivery company, could soon lose its autonomy (vauvau)
Birger Nicolai

BERLIN -- Marie-Christine Lombard hasn't been in her job as CEO of TNT Express, the international express delivery company, for a year yet, but she may soon be looking for another job. If United Parcel Service (UPS) really does take over the Hoofdorp (Amsterdam)-based TNT, as the U.S. company plans to do, Lombard's days at the head of the company are numbered.

UPS is offering 5 billion euros for TNT, whose management has refused the offer. But it could just be a matter of time – and maybe a higher offer. Another possibility is that FedEx, UPS's arch-rival, engages the latter in a bidding war. Either way, TNT – as has been predicted for some time – is likely to lose its autonomy.

Last year's consistently dissapointing quarterly results are a big part of the reason why TNT is ripe for a take-over. Lombard presented the company's most recent earnings figures on Tuesday. She reported fourth quarter losses of 173 million euros, and admitted also that TNT is having a "difficult start" in the first quarter of 2012. DHL, a subsidiary of Deutsche Post, earned billions in profits from the express business in 2011. UPS announced an annual profit of $4 billion. TNT, in contrast, keeps having to postpone trying to meet its profit targets.

The company's problems appear to be self-inflicted. So far, acquisitions and expansion in India, China and Brazil have only cost TNT money. The structure and equipment needed to operate on a global scale require big investments and only bring profits if used to full capacity. Sector experts say that TNT is too small to be able to keep up with UPS, FedEx and DHL, and doesn't have enough financial means to build the company up.

Shareholders ready to sell

Another factor is that major TNT shareholders -- financial investors Jana Partners and Alberta Investment, both known for aggressiveness in realizing their goals -- are pressuring it to sell. Another big investor, New York-based investment fund White Eagle Partners, made it known over the weekend that they thought 15 euros per share was appropriate, which is miles away from the 9 euros that UPS is offering. Dutch Post NL owns 30% of TNT; the rest of the stocks belong to many smaller holders.

U.S. sector leader UPS has had its eye on TNT for a while, and the American company has admitted having made earlier bids to buy it. "Since there's no longer a lot of room for growth on the home market, the Americans are going into the European market in a big way," Horst Manner-Romberg, head of Hamburg-based MRU, a courier, express and parcel delivery logistics consultancy, told Welt Online.

UPS dominates the global express market, which is to say the business of rapid – and expensive – delivery of letters and parcels. Its interest in TNT would be the latter's extensive truck network throughout Europe, Australia and South America.

UPS could face integration problems

TNT was founded in Australia, and – as Thomas Nationwide Transport – was sold in 1996 to the Dutch postal service, which is where its strong market position comes from. Although UPS, with 10% market share, is also big in Europe, it's nowhere near as strong as either TNT, which has 18% market share, or the Deutsche Post subsidiary DHL.

But a TNT take-over by UPS does stir up some questions. What would UPS do with the TNT brand? How would the company mesh its products, prices and distribution networks with those of TNT? TNT works a lot with subcontractors, while UPS prefers to work with its own people. "The integration of a complete express company, like TNT, that is structured completely differently will definitely pose problems for UPS," says Manner-Romberg.

A different question entirely is whether UPS would get the go-ahead from E.U. antitrust authorities. Sector experts believe that Deutsche Post will step in and, citing restrictions in the U.S. market, demand fair competition conditions. Speculation about the future of TNT has impacted company share prices, which went soaring to just over 10 euros on Monday.

Read the original article in German

Photo - vauvau

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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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