Transport & Logistics

The global economic slowdown is hurting every area of the transport and logistics industry. The airline sector is experiencing falling demand from passengers, air freight volumes are down and the rail and trucking sectors are experiencing declines in the amount of goods shipped.

One of the biggest hurdles facing transport executives is energy costs. Fuel hedging is a common practice for most of the industry but given the volatility in oil prices last year; many companies are scrutinizing their hedging practices more closely. Some airlines are paying well over market prices for jet fuel because of their hedging positions. Most T&L companies have taken steps to reduce their dependence on non-renewable energy sources. Executives surveyed by PricewaterhouseCoopers said they are searching for ways to reduce operational energy consumption and are turning to alternative energy sources. A third of the executives surveyed said their companies are investing in energy-related technologies.

Meanwhile, T&L supply chain partners are suffering from the downturn in the world’s economy. This could have a devastating effect on T&L firms who rely on these local subcontractors. Transport companies will have to develop contingency plans to deal with bankruptcies or other sudden changes that occur with their supply chain partners.

Despite the industry’s challenges, 25 percent of T&L executives believe their companies will complete a merger or acquisition in the next 12 months, according to the survey results. The economic crisis may spur some transport operators into merger talks because they are struggling to survive or they see it as a prime time to cement their leading position in the industry. Nineteen percent of the executives said they have completed a merger or acquisition in the past 12 months.

During 2008, the T&L industry completed 181 deals with a total value of $93 billion. In 2007, there were 192 deals with a total value of $81 billion.

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