For many years, U.S. e-tailer Amazon has been one of the logistics giant DHL’s key customers, as illustrated by their close cooperation at Cincinnati/Northern Kentucky airport, a hub used jointly by both parties. But times are changing. Meanwhile, Amazon is increasingly operating its supply chains from beginning to end by itself. This is considerably impacting DHL’s parcel business, as figures indicate.
With an annual turnover of €1.2 billion, corresponding to approximately 2% of Deutsche Post's total sales, Amazon continues to be one of Deutsche Post Group's largest customers. However, the
trend is declining, as shown during last year’s peak season and the Christmas business. Although the total number of Amazon packages transported by DHL still increased in 2019, growth has
considerably leveled off, compared to previous years. Part of this business has been lost, Deutsche Post Chief, Frank Appel, admits.
Having said this, he immediately announced some good news: global online trade continues to grow, spurring Deutsche Post’s sales in the coming years.
Strong annual result
Last year, Deutsche Post generated a profit of over €4.1 billion before interest and tax, versus 2018 earnings of €3.2 billion. In 2020, the CEO helmsman expects his company to surpass the €5 billion mark but points out that the closure of production sites in China lasting several weeks, and the further spread of the corona pandemic leading to economic hiccups, could endanger this target.
And another threat to the Group's growth strategy is looming on the horizon: Amazon's massive investments in its own fleet and logistics network. Currently Amazon Air, former Prime Air, operates 50 freighters leased from different providers, among them 45 long-haul B767Fs. Until 2021, the fleet will grow to 70 units minimum, the company says, enabling the e-tailer to launch intercontinental services.
Rapid expansion of ground infrastructure
Simultaneously, the U.S. online retailer is massively investing in logistics centers, such as at Leipzig/Halle Airport in Saxony, Germany for instance. A sorting and distribution center encompassing 20,000 m² is currently being set up there, creating 200 new jobs. Its prime function will be to serve as a transshipment hub for imports needing to be redistributed across Europe. The future LEJ hub, scheduled to go online before the end of this year, complements the 13 distribution centers already operating across Germany, Amazon’s largest market in Europe.
With more freighters being added to the fleet, market observers expect the online merchant’s next move will be to launch transatlantic flights, using Leipzig/Halle as hub for the regional distribution of Europe-bound packages. This includes goods produced in one of the block’s member states, traveling by air via hubs such as LEJ, BRU or CGN to their final consignees based in other EU countries.
Will Amazon Air approach Europe soon?
A large part of the feeding and distribution services will probably be carried out by DHL Express and its regional fleet of B757Fs based at LEJ Airport, covering pan-European routes. However, much suggests that in the near future, flights across the Atlantic will be managed by Amazon itself, to the detriment of DHL Express and its long-haul network. No wonder that Deutsche Post helmsman, Frank Appel, was cautious when speaking about the future volume growth of his company’s most successful subsidiary at the Deutsche Post’s annual press conference last week.
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