News / Gulf resolution needed, says DHL chief fearing for Asia-Europe trade

DHL chief executive Tobias Meyer has praised the speed  at which the company relocated its Middle East operations following the onset of the US/Israeli strikes against Iran, but warned that without a resolution, Asia-Europe trade could struggle.

With its Express Middle East division hubbed out of Bahrain, DHL’s operations were exposed to Tehran’s retaliatory strikes against civilian and military infrastructure across the Gulf, forcing a seven-week closure of Bahrain airspace.

“I’m very proud how colleagues in the Middle East handled the situation, but also more broadly how our operating divisions reacted to the changing environment and continue to execute the [necessary] measures,” Mr Meyer said during yesterday’s Q1 investor call.

He added: “This includes the ability to shift, especially in our asset-intensive express network to continue to work on the cost and structural improvements as well as the established yield mechanisms.”

Bahrain closed its airspace immediately US/Israel attacks began, but after Iranian counter strikes began, resulting in several deaths, the closure remained in place until 9 April.

Mr Meyer said the division was swift to relocate its regional airfreight operations to Muscat and Riyadh, “which meant we were able to evacuate some aircraft out of Bahrain after several days of the conflict, with those aircraft then being productively deployed”, he added.

“Our regional road network was extremely helpful in this situation to connect Riyadh and Muscat to those areas, the UAE, Qatar, Bahrain, but also Kuwait, where airspace was closed. So that enabled us to provide good service to our customers.”

Similarly, the company turned to Oman and Saudi Arabia to resolve transit issues that emerged from the Strait of Hormuz’s closure, with the latter’s Red Sea ports offering alternative gateways for regional trade.

This necessitated use of overland options, but Mr Meyer said the company “secured additional trucking capacity very early in the conflict to distribute containerised cargo across the region” – although this was only possible because of government intervention.

Panellists in an IRU convened discussion on land transport across the Gulf Cooperation Council (GCC) countries noted that without governments and private sector swiftly collaborating, there would not have been an overland alternative to air and sea.

Achraf Ellili, CEO of Saudi-based Flow Progressive Logistics, said: “Every authority has contributed to have the entire ecosystem working together meaning things we thought would take ages have happened in 47 days. The level of GCC work is something I’ve not seen before. I do expect full normalisation of this route after the war, but I do not expect things to return to normal either. Saudi as a logistics hub has been facilitated by the crisis and it is not going back in the box.”

Despite DHL’s success relative to the situation, Mr Meyer noted that with the continuing airfreight capacity shortage from Middle Eastern carriers provoked by the conflict, trade flows from Asia to Europe could be hobbled.

He said: “There is a broader impact on the air freight market for Asia-Europe, where we continue to see elevated rates. As the Middle Eastern capacity is not available, the hub carriers in the Middle East do not provide the same capacity we are used to.

“That definitely continues to have an impact. We obviously remain cautious because the jet fuel situation raises prices, raises cost for our customers that also has effects on the demand side. But the Asia-Europe air freight market remains strong.”

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