Freightways shrugs off rivals

By Nick Stride

Friday 13th February 2004

Freightways managing director Dean Bracewell this week shrugged off new competition to the company's workhorse express parcels division as he unveiled a record $8.5 million December first-half profit.

Mr Bracewell said Freightways had a market share in express parcels from which it derives 90% of its revenue of about 39.5%, compared with New Zealand Post's 43%.

Low-cost airline Origin Pacific last week announced a new same-day, airport terminal to airport terminal package service but analysts are dubious about its market impact.

Targeted at small to medium sized businesses, it is little threat to Freightways or to New Zealand Post while customers have to deliver packages to Origin's airport counters. Airfreight national operations manager Wayne Christie said Origin was talking to "everyone" in the courier business about extending the service door-to-door. Possible partners are smaller players Fastway and Peter Baker Transport. Toll Holdings, which operates courier businesses in Australia, is also a possibility. Toll managing director Paul Little had no comment.

Andrew Mortimer, an analyst at First NZ Capital, said Origin's move was of some concern as air line-haul was one of Freightways' major competitive advantages. However, most express freight customers preferred overnight delivery logistics. Mr Christie said Origin was "definitely" looking at overnight. "But we'll grow by progression."

The main problem with overnight is that passenger aircraft have limited freight capacity, and would have to fly with empty seats as there is little demand for night flights.

Aircraft such as Origin's ATS 72s can be converted to pure freight but that is expensive and volumes would have to justify it.

Airwork charters "quick-change" dual-purpose aircraft, but they are on contract to New Zealand Post, which might not take kindly to Airwork accommodating a competitor.

First New Zealand Capital's Mr Mortimer upgraded his forecast for Freightways' June full-year net profit by 6% to $14.3 million and his 2005-year forecast by 7% to $17.3 million.

Both forecasts had "upside" to them, he said.

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