TNT Express Annual Report 2011

Business performance
Chapter 2
led to sub-optimal capacity utilisation of TNT Express’ own fleet of intercontinental aircraft. Profitability
was also negatively affected by high fuel costs.
At the beginning of 2011, TNT Express operated four Boeing 747 freighters to and from Asia, serving
Chongqing, Hong Kong, Shanghai and Singapore, two of which were on short-term leases. This
capacity was reduced at mid-year in line with weaker demand. However, at the end of the year, TNT
Express took delivery of three Boeing 777 freighters. Measures are being taken to limit exposure to
volatile and weaker Asia demand. In 2012, TNT Express intends to further explore capacity reduction
measures including sale of some operations, subleases and capacity sharing arrangements.
Domestic China successfully continued its targeted growth of day-definite product to reduce the
proportion of LTL services. Day-definite grew by more than 100% year-on-year and represented at yearend
almost 30% of revenues (2010: 15), well on track to realise the projected 40% of revenues in 2013.
Australia recovered strongly, after enduring flooding and strikes in the first quarter of 2011, due to a
combination of successful yield management and cost control initiatives.
V. AMERICAS
GENERAL
In South America, TNT Express has key positions in the domestic express market in Brazil and Chile,
realised through the acquisitions of Expresso Mercúrio and Expresso Araçatuba in Brazil and LIT Cargo
in Chile. In Brazil, TNT Express’ network covers 140 locations. Its service offering to customers is
supported by fully automated hubs and the application of leading track-and-trace technology. The region
is connected via the South American Road Network.
TNT Express’ operations in North America provide full service capabilities to its customers both in North
America and on other continents. TNT operates a dedicated service from Europe to New York,
supplemented by commercial linehaul. TNT Express’ four gateways (New York, Los Angeles, Chicago
and Miami) feed a nationwide parcel distribution network that relies upon a combination of own
operations, regional partners and commercial airlines. Through this configuration, TNT Express is able
to provide next-day before 3:00 pm delivery service to many key metropolitan areas across the United
States.
2011 PERFORMANCE
Year ended at 31 December 2011 variance % 2010
Adjusted revenues 474 (5.6) 502
Adjusted operating income (125) (39)
Average consignments per day ('000) 54 (11.5) 61
Revenue per consignment (€) 1 34.3 7.5 31.9
Average kilogrammes per day ('000) 3,289 (18.2) 4,023
Revenue per kilogramme (€) 1 0.56 14.3 0.49
1 based on reported revenues @avg10 rates
(in € millions, except percentages)
In 2010, TNT Express pursued the integration of the two acquired Brazilian businesses, Expresso
Mercúrio and Expresso Araçatuba. The complexity of the integration process was underestimated and
resulted in process and systems failures in addition to the loss of critical employees, which in turn
severely affected administrative and service quality. This culminated in the loss of major customers at
the beginning of 2011.
Significant revenue losses and higher costs (inflation, service quality recovery and provisions) led to a
significant negative operating income for the year.
In the spring of 2011, a full turnaround plan was initiated which included changes in the management
team, organisational structure and key processes and controls. These actions restored service levels
and ensured better controlled administrative processes. On-time delivery performance was above 95%
in the last quarter of 2011. On the back of solid operational performance, sales initiatives were
undertaken. These resulted in a significant reduction of the revenue gap in the last quarter of 2011. By
the end of the year, with operations stabilised, the focus turned to controlling costs. The turnaround
target of the second half of 2012 is reiterated.
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