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Oil price volatility sparks a re-think In view of the oil price volatility, global integrators like DHL, UPS, FedEx and TNT have been revising fuel surcharges, which shot up considerably in the months of May and June, only to be followed by slumps in more recent months. Consequently, customers and operators alike have witnessed uncertainty in express rates within the domestic and international air express segments.
Most of the express and parcel delivery companies are starting to see road and rail as viable alternative modes of transport pertaining to the costs and service capabilities compared with air services. In the three mature markets of Germany, France and the UK, express operators are increasing the use of the rail sector, especially in the international delivery services between European countries where trade flows are vibrant. Express operators such as Time:Matters (Germany), DHL (UK), Business Post (Same Day) UK and Swiss Post are already offering express services through the rail network to serve same day and next day domestic delivery requirements. US operator FedEx has plans to team up with the French rail network as high speed TGV trains running at 300 kmph (Eurocarex - Cargo Rail Express project) can prove to be both a viable solution for time definite deliveries and help reduce reliance on air networks for domestic and international deliveries within the EU. This is also expected to streamline critical overnight express deliveries, as rising noise levels due to night time deliveries in the airports continues to cause problems for residents in the surrounding airport area. Hence, night time deliveries via rail which can serve to carry express freight along with parcels are considered a more sustainable option as opposed to air.
Re-emergence of road and rail
With the robust road infrastructure in the developed countries of Western Europe, road transport has re-emerged as a cost effective method for the movement of packages in the intra-EU region and accounts for approximately 80% of the total express market value in the three developed markets of Germany, the UK and France. However, congestion charges in central London, Stockholm, Oslo and various other cities have made road transport on certain occasions costlier than rail. Additionally, rail transport makes environmental sense, as the emission levels are significantly lower than that of road.
Express door-to-door delivery utilizes intermodal transportation for both domestic and international segments, however, in the medium to long term, there is expected to be a defined shift favoring rail transport over road and air. Both express and railway companies, especially in the UK, have realized the opportunity for intermodal delivery through rail networks. This trend is being further fuelled by targeted express delivery services being offered by private rail operators in Europe. For example, EWS (the UK's rail logistics operator) already provides multi-user services (night deliveries) through its rail network to companies such as DHL and Business Post.
While some express companies see opportunities in rail express delivery, the urge to reduce logistics costs has pushed a few B2B companies to compromise on the time factor and even turn towards ocean-borne services. The developments in the ocean services sector now provide for day-definite services with date certainty for overseas trade and thus emerge as an indirect threat to intercontinental air express, says Datamonitor automotive and transportation logistics analyst Sraavani Rao.
"The express delivery market has witnessed a clear shift from air to road over the last few years as fuel surcharges and economic uncertainty became more problematic.
"An alternative mode of transport that offers great potential is rail, as most companies come to realize the potential of rail express delivery. This is expected to increase the share of rail in the modal mix of transport in the years to come and also provide opportunities for express companies to both compete effectively and satisfy shippers' requirements," she says.
Notes for editors
Related Research: Express Market Map 2009 Datamonitor's European Express Market Map analyses a sector worth over EUR39 billion. Detailing 12 major markets in Europe, we map value and volume of the express market, segmented by service level, destination and type of recipient, all forecasted to 2013.
Datamonitor analysts are available for comment
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