Despite current challenges transport and logistics leaders see light at the end of the tunnel

Published at 09:56 AM on 03 February 2009

CEOs in the transport and logistics industry are less optimistic about growing their business than they were last year, according to PricewaterhouseCoopers. A third of the 67 CEOs interviewed for PwC’s Annual CEO Survey said they are confident about increasing their companies’ revenues over the next 12 months, compared to over 90% of respondents in PwC’s CEO survey at the same time last year.

The fall in confidence comes as no surprise given that the airline sector is experiencing falling demand from consumers and business travellers as well as being hard hit by the decline in exports from Asia. The railway sector, which makes much of its revenues from the transportation of steel and cars, is likewise gearing up for a massive drop in cargo volumes. Container shipping has nosedived, with freight rates for dry-bulk shipping plummeting by as much as 90%, and the trucking sector is also feeling the pinch.

Despite this reduction in demand. transport and logistics CEOs are more cheerful about the medium-term outlook - 75% are somewhat or very confident that the industry as a whole will pick up over the next three years. Leaders are banking primarily on better penetration of their existing markets to achieve that growth. Twenty-two percent also have their eyes on new geographic markets for expansion.

However there are a number of challenges on the horizon. Nearly 40% of respondents plan to increase the number of people they employ over the next 12 months, but over 30% anticipate having to downsize.

Some transport and logistics companies may find it harder to extract payment for their services as a growing number of their customers experience financial difficulties. This would affect their cash flows, but it might also have long-term implications.

At the other end of the supply chain, local subcontractors may become more financially vulnerable – and the use of such partners is an inherent part of the industry’s business model. Transport and logistics CEOs may therefore need to develop contingency plans to cope with insolvencies or other sudden changes in their supply chains.

Non-renewable energy tops the list of issues about which transport and logistics CEOs worry. Eighty-four per cent are looking for operational improvements to reduce energy consumption; 52% are turning to alternative energy sources and 33% are investing in energy-efficient technologies.

Klaus-Dieter Ruske, global transportation and logistics leader, PricewaterhouseCoopers, commented:

“Energy remains a key concern for transport and logistics CEOs. Fuel hedging is common practice in much of the industry but, given the extreme volatility in oil prices in 2008, many companies may want to scrutinise their hedging strategies more closely. Some airlines, for example, are now paying well over market prices for jet fuel, as a result of their hedging positions.

“The global economic slowdown is hurting every area of the transport and logistics industry. Every CEO will have to make tough decisions about what actions are required to ensure his or her company’s short-term survival. Yet none can afford to ignore the need to build a business that is agile enough to respond to new situations as they emerge, durable enough to grow over the long term and responsive to the requirements of all its stakeholders.”


Notes to Editors:

For more details or a copy of the report please visit www.pwc.com/ceosurvey 


For more information contact:

Vanessa Shaw
Consumer and Industrial Products & Services PR Manager, PwC 
Tel:020 7212 1002 
Mobile:07989 572 425 

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