Panalpina Annual Report 2006

Report of the Executive Board
16 Panalpina Annual Report 2006
Quarterly development of the core activities
Air freight Ocean freight Supply chain management
in million CHF
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
248
535
734
315
675
844
Q1/05
Q1/06
Air freight review
271
593
810
292
679
887
Q2/05
Q2/06
According to statistics gathered by IATA, International
Air Transport Association, the international
freight tonnages grew by 4.6% in FTKs (freight
ton kilometers measuring the actual freight traffic).
This is still below the trends seen in the past of
5.6% in average, but better than in 2005, where
the air freight market growth was 3.2%.
Industry sources have attributed the continued
downturn in freight tonnages to high oil prices that
are dampening economic activity.
The air freight activity in 2006 for the Group can
be summarized as follows:
• Tonnages grew 10.5% reaching 874,000 tons.
This outgrowing of the market was fueled
by the gaining of new accounts as well as by
the increase of existing business favored by
the positive trend of the world economy in 2006.
• Fuel and security surcharges were still inflating
the net forwarding revenues, remaining at high
levels during the better part of the year.
Tonnages on westbound traffics, namely Asia –
Europe, and eastbound Asia – North America
remained buoyant and grew at rates well above the
average growth rate experienced in the market.
Tonnage growth on eastbound traffics from Europe
to the Far East and Asia were still suffering from
over­capacity and a downtrend in prices to customers.
Overall, the tonnages flown on the lane
Emea – Asia – Emea experienced an increase of over
19.5%. This remains the Group’s single most
important trade lane comprising over 30% of total
tonnage.
Next to those rather traditional high volume
trade lanes, in 2006 a new trend started to show
and recorded impressive growth rates: Asia – Latin
America has increased more than 20% compared
to previous year.
283
625
859
315
717
912
Q3/05
Q3/06
340
646
1,005
274
755
1,070
Q4/05
Q4/06
In summary, air freight tonnages grew at a much
higher pace than in 2005 with continued imbalances
on the different trade lanes and fierce competition
to secure capacity during high season:
price pressure both from airlines and customers
is omnipresent.
Ocean freight review
Recording an impressive revenue growth of 17.8%
over previous year, ocean freight was the front
running core activity in 2006. The reasons thereof
are enumerated below:
• 17.4% volume increase out­paced market growth
of 10.7% (Clarkson, January 2007). The absolute
figure rose from 922,880 TEU in 2005 to exceed
the million TEU with 1,084,000.
For the first time since many years, the supply in
containerized capacity substantially outpaced
the demand, having a compressing effect on the
level of the ocean freight buying rates.
The Europe – Far East eastbound / westbound
trade lanes are the Group’s strongest trade lanes,
comprising over 35% of ocean freight volumes,
followed by the Transpacific eastbound /westbound
trade lane, which comprised 17%, and
the Transatlantic eastbound/westbound, which
comprised 16%.
In ocean freight, the same scenario as in air freight
could be observed: one of the most significant
growth rates was recorded on the Asia – Latam
southbound lane growing by 47%.
• The net forwarding revenue of the first quarter
2006 ended even higher than the highest quarter
of 2005, announcing a record year. The revenue
growth was affected by both, a considerable
increase in volume and a growing imbalance of
supply and demand for capacity on the market.
This granted the industry and consequently
Panalpina further rate decline on the major East /
West trades.
In a contrast, the capacity supply for bulk vessels,
necessary for the Group’s special project business,
was not exceeding demand in the same way
as the container ships capacity. Consequently
the freight rates of this sector increased during
2006, contributing to higher net forwarding
revenues, the project business accounting for
5% of the total Group’s revenues.
The Bunker Adjustment Factor (BAF), corresponding
to the fuel surcharge for ocean freight,
remained at very high levels during the majority
of the year, slightly easing up during the last
quarter. Nevertheless, the average BAF for 2006
was higher than for the previous year. Management
estimates its share on the net forwarding
revenues increase over the previous year to be
approximately 7%.
• Continued pressure from customers.