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Swiss watch

Panalpina has a unique proposition – its own fleet – which could offer a great strategic advantage in the good times. But when capacity is high and demand is low, how can the forwarder turn its assets into profits? Alexandra Lennane talks to the new head of air freight, Lucas Kuehner

The question, for a good six months, has been about whether all-cargo players can survive. And if they can, under what circumstances? With a financial backer, as did Air Cargo Germany? With a good niche network, such as Polar Air has? With an integrator, much like Polar Air or AeroLogic? With a logistics provider partner, as Cargolux has contemplated?


Whatever the choice, there is no doubt that the market will still be a challenge – and not just for pure carriers. Because here we have an operator of two large freighter aircraft, one that is also a forwarder. And that doesn’t necessarily make it any easier.


The question for Panalpina is whether it has the best of both worlds – or the worst.


Last year was undoubtedly a difficult one for the Swiss company, which derives some 50% of its business from air freight. Hit by falling volumes, weakness in the eurozone and a heady amount of new capacity in its own controlled network, it reported “disappointing results” in air freight in the third quarter of last year – although its 2012 full-year results won’t be announced until March.


Immediately the word went around the market that Panalpina would be restructuring its air freight operations – but in actual fact what the company did was to replace its existing head of air freight, Henrik Lund, with its US managing director, Lucas Kuehner. Officially taking over in December, unofficially he began reviewing the air freight business in October, just after the second of two Boeing 747-8Fs arrived from Atlas Air in July to replace the company’s Boeing 747-400Fs. “We were celebrating when I was first confronted with the idea,” says Kuehner.


So what was first on the list to try to turn around the 8% drop in air freight volumes (against a market average of -4%)?


“Well, you rarely get a brief to execute – Panalpina works in a collaborative way.


“But we were in a difficult situation, as the whole industry is, so we needed to make changes to get back to a leadership position. It needed to be sorted out and we needed to engage and talk and develop a plan. We have the ingredients to make it work.”


The first challenge was to identify exactly what was going wrong. Kuehner starts by focusing on the industry’s woes in general.


“First of all, air freight is on the decline. Everything is about cost – everyone is battling with it. So in the air freight industry there has been a colliding situation of new capacity and lack of demand.


“And then there’s the environment we are competing in, which is more specific to Panalpina, in that we are in Europe where there is a tougher economic situation.”


That of course is true for many companies – Kuehne + Nagel, Damco and DHL Global Forwarding all have significant exposure to the European market – and yet Panalpina, the specialist, saw air freight volumes fall twice as much as the market average.


Kuehner admits that the company was perhaps a little too reliant on a handful of customers that had a bad year.

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