DHL Express To Launch New Cargo Airline In Europe

DHL Express is transforming its international air network with the creation of a cargo airline in Austria and other changes in response to strong volume growth and customer expectations for faster delivery of e-commerce orders.

The parcel carrier on Tuesday said it is in the process of filing applications with Austrian authorities for a new airline that will mainly operate European cargo flights and plans to convert its DHL Air UK unit into an intercontinental long-haul carrier. DHL also is leasing four more 767-300 freighters to support operations in North and South America.

The express delivery company said it expects the new airline to be established and begin operating on intra-European routes later this year using a fleet of Boeing 757 medium-size freighters that will be transferred from DHL Air UK.

The U.K. unit will transition to serve long-haul markets by expanding 767 freighter operations and adding new Boeing 777 freighters to its fleet.

"With the planned structure, we will achieve both a flexible and even more resilient airline network in Europe and a better global integration by increasing our intercontinental flights," Roy Hughes, executive vice president of network operations in Europe, said in a statement. 

DHL Aviation is a division of DHL Express, part of Bonn, Germany-based Deutsche Post DHL, that provides air transport capacity for the company's parcel business. It's an umbrella organization for several airlines owned, co-owned or chartered by DHL Express. DHL Aviation also makes its network available to logistics companies that need airport-to-airport moves, which increases efficiency by helping fill planes or utilizing them when they are between shuttle assignments for the express network.

Carriers that fly for DHL Aviation include AeroLogic, ASL Aviation, SmartLynx, Cargo Air and Condor.

E-commerce is pushing parcel integrators like DHL to keep upsizing their fleets and has increased prospects for sustained growth within the air cargo sector overall. UPS Airlines (NYSE: UPS) is scheduled to take delivery of 11 aircraft this year — three 767s, two MD-11s and 11 747-8s, spokesman Jim Mayer said. Boeing delivered another 747-8 last week.

FedEx FDX, which is also beefing up its fleet, received a 777 freighter from Boeing on Tuesday, according to a photographer who documents activity at Boeing's complex in Everett, Washington.  

The pandemic drastically shifted consumer behavior toward e-commerce as people under lockdowns and social distancing rules relied on virtual shopping instead of trips to the store to buy goods. And they are making it clear they want higher levels of service from retailers, who in turn are asking more of service providers.

EMarketer estimates worldwide e-commerce sales will top $5 trillion and represent more than 20% of total retail sales, up from about $1.7 trillion and 13% of total sales in 2018. The pandemic pulled e-commerce growth forward by three years in the U.S., two years in China and five years in Latin America, market researchers say.

Eighty percent of cross-border e-commerce is transported by air, representing more than 20% of the total global e-commerce trade value, according to the International Air Transport Association. 

Deutsche Post DHL DPW recently reported the best first-quarter results in its 50-year history, with Express posting a 32.5% revenue gain and 26.3 growth in volume. DHL Express was able to increase the volume of time-definite international shipments by more than 25% compared to the first quarter of 2020. The company said it expects continued volume growth as more businesses offer digital sales channels to consumers and businesses increase purchases on online platforms.

DHL Express said the new strategy for DHL Air UK, based at East Midlands Airport, is designed to adapt to the fast-changing shipping environment. The airline will increase flights between the U.K., the Americas and Asia by adding more medium-size 767s and introducing large 777 freighters. Officials said the remodeled airline is expected to begin 777 operations in early 2022.

DHL Express has received 11 of 14 777s it ordered from Boeing in 2018. In January it ordered eight more 777s, with the first deliveries scheduled for next year. 

The express carrier also is adding flights and up-gauging aircraft in its Southeast Asia air network, which has also experienced a boom in e-commerce business.

Separately, Air Transport Services Group (NASDAQ: ATSG) said late Monday that its leasing subsidiary, Cargo Aircraft Management, has agreed to lease DHL Express' U.S. subsidiary four additional 767-300 converted freighters for seven years each. Three of the four aircraft will be delivered during the second half of this year and the fourth will be inducted into DHL's fleet in early 2022. 

Neither company provided information on who would fly the leased the aircraft for DHL.

The additional four aircraft will bring the number of ATSG-owned 767s flying under the DHL banner to 17. Another ATSG subsidiary, ABX Air, operates eight aircraft in the DHL network.

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Image by Bilal EL-Daou from Pixabay