Despite a 40% drop in automotive volumes Panalpina Air & Ocean does not plan to limit its exposure to the sector and is continuing to offer flexibility and dedicated service as it anticipates new business.
However, the Swiss-based provider has admitted having grown its share of the business over-proportionately in high volume industries including automotive compared to its competitors due its success in the US and South American markets. “We have nice growth rates in those industries in the past but that’s just the way it goes. Now those industries are suffering so are we,” said spokesman Martin Spohn at a media gathering held at its Luxembourg airfreight terminal last Thursday.
Panalpina Group net profits were dropped 77.9% during the first half of 2009 compared with the same period last year and its airfreight volume was down 28% in the second quarter compared to last year despite a 3% rise on the first quarter of 2009.
But while volumes were down the company was keen to stress its customer base was secure. “Obviously we have lost quite a lot of volume but we have not lost a lot of customers,” said Spohn. “It’s the volumes from those customers, particularly in industries such as automotive and telecommunications that went down drastically [but] it would be a much bigger problem if we had lost customers. It is important to see the difference.”
In the US Panalpina flies directly to Huntsville in Alabama, which is within overnight delivery radius of 75% the main areas of consumption for the industries it serves. In terms of automotive, Huntsville gives access to BMW’s plant in Spartanburg, South Carolina and Mercedes-Benz’s plant in Tuscaloosa. It is also near Chattanooga where Volkswagen is due to start production in early 2011.
Even though the company recognised that currently carmakers are not planning to use airfreight and that those who had moved air shipments to ocean were unlikely to return, it was still committed to the customers it had. “We are recognised as one of the leaders of the automotive industry who understand their needs and can react flexibly and swiftly to their needs,” said Robert Frei, Managing Director of Panalpina Air Freight.
“Huntsville being our landing point we can easily distribute to all the factories with transit times that you can not achieve if you go via Atlanta. These are the specialties for the automotive industry that we still offer today.
“It is being asked for a little less than it was a couple of years ago,” admitted Frei and the company has reduced its flights to Huntsville from a maximum of nine flights a week to five. But he added tentatively, “VW is building a new factory there.”
On top of the severe impact that the automotive industry has had on it, Panalpina is also to an extent a victim of overcapacity in the airfreight industry. Having started its business by targeting niche airports and dedicated industry verticals such as automotive in order to gain maximum competitive advantage, Frei admitted it is now having to compete as those locations are increasingly targeted by airlines with overcapacity.