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Aviation History
1987
1987 - 0030.PDF
The growing pains of express parcels European express parcels carrier XP is watching the American giants move into its market. Ian Dormer reports on how the Dutch carrier is handling the situation, as KLM increases its stake in the carrier to 100 per cent. Overnight parcels delivery in Europe is still in its infancy, but it is grow ing fast. Dutch operator XP Express Parcels is expanding by about 40 per cent a year, but several of the much larger US fast-package companies (one of them 300 times bigger) are starting to elbow into its market. Federal Express, Emery, and United Parcel Service are among those now making concerted efforts to develop integrated European express parcels systems. XP president Jaap Mulders says they could be market makers or market breakers. The actual size of the European express parcels market is unknown, although the American companies say it is the second largest outside the United States. Mulders believes that the Americans are crossing the Atlantic because there is likely to be less room for expansion in their domestic market than hitherto. He fears they may be using Europe as a battleground to thrash out the problems they have at home. It is not their competition which Mulders fears, but their approach to the market. "If they run through Europe like elephants in a rosebed, they will be a threat," he says. He accuses some US companies of price dumping, but adds that the dumping is masked. The published rates are just reasonably competitive, but they discount heavily for regular custom ers, sometimes to well below cost price, he claims. Mulders feels that this is irresponsible, because these prices can only be main tained for a short period. When the market price is restored the increase will result in a loss of customer confidence in the product, he says. If a European express parcels carrier tried to enter the US market and do the same it would be stopped, he adds. XP wants regulations in Europe to control such actions. Mulders says: "The Americans are in an unfair position". Conversely, the economic resources of the new American entrants could benefit the market by educating potential custom ers, concedes Mulders, who says that their marketing budgets are large, and should have a positive spin-off for European carriers. If all they seek is their fair share of the market, he has no complaint; it is big enough for them all. XP has about 10 to 20 per cent of the European express parcel market, "but we have no aspirations to become the world's largest—just the best," he adds. Lack of market data is part of the problem in determining XP's share. So is the blurred definition of an express parcels carrier. For example, Emery has been primarily a freight carrier, but now also has an express service to and around Europe; TNT is a worldwide trans portation group (which now flies the BAe 146QT); DHL has hitherto concentrated on courier services, while UPS is particu larly strong in the German freight market, as well as offering fast-package deliveries. As far as XP is concerned, quality takes priority over price—within reason— because that is what its customers want, Mulders says. The company plans to improve its service further while control ling unit costs, and it believes its market share will increase as a result. Economies of scale only work up to a point, Mulders says, and if an increase in its size were to reduce the quality of its service, then it would not be desirable. XP offers a money-back guarantee that its parcels will arrive when promised, although Mulders says "XP's customers are not really inter ested in a rebate, but in getting the parcel there on time". A service guide published by XP states the guaranteed delivery times for a parcel: "Tomorrow before lunch" at major Euro pean centres, and either before the close of business the next day or within 48hr else where. Urgent parcels, however, can be PH-FKT «» 28 sent by the XP "sprinter service", to arrive by the start of the next business day. The success rate is over 99 per cent. To meet its commitments within Europe, XP uses a combination of its own aircraft, more than 500 road vehicles, charter airlines, and scheduled flights. Scheduled airlines are also used to fly parcels to the United States and Japan, as well as a small number of packages to other key areas of the world. Its Maastricht Airport hub in the Nether lands is regarded as an important factor in its operation. In a key position to serve Northern Europe by road, and with several alternative airports available within a couple of hours drive, it can main tain its service under most conditions. The airline owns one Fokker F.27 and a Piper Navajo Chieftain, and hopes to have another two F.27s by the end of the year. Buying these secondhand aircraft is an essential part of the airline's economics, because of the inherently low utilisation of parcels operations. XP also owns Rijnmond Air Services, a Rotterdam- based specialised air taxi company. It has been used regularly by XP to carry parcels, but is now called upon only when the parent company is short of capacity. Five other dedicated carriers are retained on three-monthly contracts to fly to ten European cities from the Maastricht hub. The point at which aircraft replace road vehicles is about 400km to 500km. The carriers' contracts specify high standards, according to Franz de Bois, XP's network director. The airline can cancel a contract immediately if quality is not maintained, but there have been no significant prob lems with subcontractors since XP started using aircraft about eight years ago. About 60 per cent of its parcels are carried on its own aircraft and 40 per cent on charters. The subcontractors are usually based at the end of the spokes in XP's hub-and- spoke system. This allows them to use the FLIGHT INTERNATIONAL, 4 April 1987
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