Although India still accounts for a much smaller portion of DHL’s Asian business compared to China, DHL Asia Pacific CEO, Daniel J. McHugh said he expects India to move into the top two or three markets for DHL Express within the next 3-4 years. Much of this time lag is a result of years of under-development in the country’s crumbling infrastructure, something thatis slowly being remedied.
The group signaled its serious interest in the Indian domestic market when it made a key investment in India’s largest domestic express player with a US$163 million acquisition of an 81 per cent stake in Blue Dart Express during the thirdquarter of 2007.
"Blue Dart is an amazing company and it is completely complimentary with the business philosophy of DHL Express, which is to be the best and fastest in every market," McHugh said in an interviewwith NDTV.
"As the market matures and the consumer income rises because of employment and investment, the road network and ground express network becomesmuch more important trade facilitator.
"So Blue Dart’s strategy going forward is to develop a ground express business to compliment its already dominant airexpress business," he said.
Together with Blue Dart, DHL has a market share of over 60 per cent of the domestic market in terms of shipments, with over 7.2 million shipments handled in 2007 with the Indian express industry growing at approximately 25 per centannually.
While Asia will experience the highest growth rates in the world, India will account for almost 9 per cent of this Asian figure annually, as compared to the worldgrowth rate of 4 per cent.
Tapping India’s growth
To tap the potential of this growth McHugh said DHL is studying how it can make the partnership with Blue Dart"more powerful".
He said it was unlikely that DHL would look for further partnerships in India because, "I think we have already got one ofthe best platforms in India."
"We believe that our strategy going forward is organic growth. I think we can improve our current infrastructure and brand leadership and grow that in an efficient way rather than going the M&Away," he said.
And while Blue Dart is a major brand within India, it also has a good reputation outside the country, he added. "The relationship between DHL and Blue Dart offers an opportunity for us to look at how we can utilise Blue Dart’s aviation capability to addto DHL Express network in Asia."
While an overseas expansion for Blue Dart is currently being evaluated, there are also innumerable regulatory issues that would have to be sorted out which means nothing is likely to come to fruition untilend of 2008 or 2009.
Fleet renewal for Blue Dart
The recent announcement of an aircraft replacement plan may be a clear signal of Blue Dart’s intention to spread its wingsbeyond India.
The Chennai-based carrier recently said it will replace its four ageing Boeing 737 cargo planes with B757s, a move aimed at boosting its capacity without increasing the current fleet size of seven. The aircraft ‘upsizing’ will boost the carriers cargo capacityby 32 per cent from 148 tonnes currently, The Chennai-based carrier recently saidit will replace its four ageing Boeing 737cargo planes with B757s, a move aimed atboosting its capacity without increasing thecurrent fleet size of seven. The aircraft ‘upsizing’will boost the carriers cargo capacityby 32 per cent from 148 tonnes currently,
Although the two are "effectively one company," in terms of their operations, a current project now underway will see them combining their network through a single managed gateway at Bangalore forthe first time.
Pharma and retail next
A key player in the pharma industry in India, developing a road logistics network would be a logical step for growing further into pharma, as well as the next step intoretail.
"We’re very excited about retail in India," McHugh said. "I think as the Indian economy becomes less dependent on exports and more focused on domestic markets,you’ll see the emergence of retail."
The company recently announced plans to open 1,000 retail points across the country by 2010, up from 150 centres currently, specifically to take advantage of the growth and penetration of retail business in the country. And in a bid to strengthen its ground network, it will also establish at least 100 transportation hubs and add more vehicles to help link the smaller towns and non-metro cities and towns. Both moves will boost the 17,500-plus cities and townsDHL currently serves with Blue Dart.
"There is a synergy in increasing retail points and road networks as we can offer all range of transport products under oneroof," McHugh said.
Meanwhile, the latest development for the express carrier, was the announcement that DHL has spent US$150 million to acquire a 49 per cent share in Polar Air Cargo, a division of New York-based AtlasAir Worldwide Holdings Inc.
The deal, which will run for up to 20 years, secures long-term access to greater air capacity on Trans-Pacific air routes for DHL and reduces transit times and increases reliability of delivery on both sides of the Pacific. The agreement will provide DHL Express guaranteed access to aircraft capacity in key global markets and also give DHL access to additional availableaircraft capacity from Atlas Air.
As a result of the deal, DHL has ended its overnight freight service partnership with Malaysian-based Transmile on USAsia routes effective 31 March. Transmile recently stopped its flights between the US and Malaysia’s Subang airport following a directive from the US Department ofTransportation.
Transmile will continue to provide intra- regional flight services for DHL Expressto all major Asia-Pacific destinations.
