DHL cuts ties with cargo airlines as efficiency initiative ramps up

DHL’s recent cancellation of transport partnerships with third-party airlines supporting its courier and freight forwarding networks is part of a new cost improvement campaign that helped the Express division achieve first-quarter operating profit despite lower shipment volume and rising trade volatility.

DHL Express’ operating profit increased 4.8% year over year to $754 million as efficiency measures ramped up, while better pricing and product mix boosted revenue 2%, according to DHL Group financial results released Wednesday. 

Management said improved capacity utilization, seasonal network adjustments and higher yields countered the drop in volume. Demand for time-definite international parcels, the Express division’s core product, fell 7.1% to 975,000 items per day, while aviation supply costs for DHL’s own fleet and purchased transportation declined 7% year over year. Operating costs at Express air hubs decreased 1%. 

In March, DHL (DHL.DE) unveiled a plan, called Fit for Growth, to eliminate more than $1.1 billion in annual structural costs by the end of next year. (FedEx and UPS have similar programs called Drive and Efficiency Reimagined.)

One way the integrated logistics provider will take out cost and drive efficiency in the air network is by streamlining the number of partner airlines that supplement the transportation provided by DHL’s own fleet, top executives said during the fourth-quarter earnings call in early March.