Concerns are rising over the drive of Maersk and CMA CGM to turn themselves into behemoths that can offer multimodal logistics solutions to shippers. Both appear to be bent on further expansion of their strategy.
CMA CGM’s foray into the air cargo sector is building up momentum. The line’s air cargo offshoot, CMA CGM Air Cargo (CCAC), started in March with two Airbus A330-200 freighters flying from its base in Liege to Chicago, New York and Atlanta, but the operation is set to expand in June with two more A330 freighters joining the fleet. The company has announced that this will extend its network to include Dubai, Istanbul and Beirut.
“Strategically located at the crossroads between several continents, these new destinations will help speed up CMA CGM Air Cargo’s development,” said the offshoot’s Melbourne-based executive vice president Xavier Eiglier.
The company stressed that it will offer rapid connection times between the new destinations and the U.S. via its Liege hub.
Forwarders are nervous about the links between CMA CGM’s air cargo arm and CEVA Logistics, which the shipping line acquired in 2019, notwithstanding earlier assertions from CEVA that the logistics and shipping arms were two different worlds.
In April, with the CCAC expansion in the works, CEVA announced two new services for air freight customers, a premium product for time-critical shipments and an offering that is built on guaranteed access to global capacity at a time when shippers and forwarders have been struggling to find lift. The network used for this extends to commercial airlines running freighters and others flying cargo missions with passenger aircraft, but some forwarders privately regard the CEVA-CCAC axis as a competitive threat with closer ties to each other, claiming that CEVA has been promoting the airline as capacity at its fingertips, which raises questions about the separation between the two.
Meanwhile, Maersk appears poised to boost its broader logistics drive with a major acquisition. At the company’s recent capital markets day Vincent Clerc, CEO of the logistics and services division in Copenhagen, hinted that the company is prepared to spend in excess of US$1 billion on the mergers and acquisitions trail.
In recent years Maersk’s acquisitions in the logistics providers arena have been relatively modest. It bought U.S. customs brokerage Vandergrift in 2019, and last year saw the takeovers of US warehousing and distribution firm Performance Team and European customs brokerage firm KGH.
Maersk’s strategy to turn itself into an integrator in container logistics has been met with lots of doubt from the outset, with critics pointing out that previous attempts by other players going in that direction ended in failure. However, the introduction of digital tools aimed at different segments of the shipper market, combined with management’s statements that it will seek growth primarily through logistics in the coming years, is causing mounting unease.
Late last year the company launched NeoNav, a transportation management offering aimed at large shippers in competition with 4PL services. This followed the introduction earlier last year of Flow, a transportation management system for mid-sized shippers. They expand on Twill, Maersk’s online suite of end-to-end solutions for small and mid-sized firms that cover ocean shipping, customs brokerage, domestic haulage and insurance.
If 3PLs and 4PLs felt somewhat uneasy about Flow and Twill, the introduction of NeoNav signalled a frontal attack on their patch. According to Maersk, the new system can help large shippers with complex supply chains align their data covering demand, inventory and transportation. The company has stressed that it is carrier-neutral, enabling shippers to pick other transportation providers than Maersk itself.
Maersk CEO Soren Skou told investors that the shipping line remains at the core of the company, but the focus for growth will be on other segments. Management has indicated that it intends to achieve its target of 1-2% annual growth in its ocean volume without boosting its current capacity level, whereas in logistics the aim is to keep EBIT levels above 6% fuelled by organic as well as inorganic revenue growth. The growth target for the combined logistics and services sectors are north of the 10% mark for the next five years, with more services being added to the mix.
For this year management expects earnings before interest and taxes (EBIT) between US$9 billion and US$11 billion, a significant boost from last year’s EBIT of US$4.5 billion. At the moment, revenues from the liner business are in the stratosphere, but over time this should slow as rates retreat from their elevated levels.
The jury is still out on the ultimate success of the integrator strategy, but in the current market conditions, as shippers are facing supply chain disruption and limited capacity, much through digital channels, the model looks appealing to shippers. If Maersk – and CMA CGM – manages to build up good traction in the market during this period, shippers may conclude they don’t need forwarders and 3PLs/4PLs to manage their traffic.
Ian Putzger
