TWU on alert over UPS-TNT merger

TWU to hold meetings with the management of UPS and TNT to ensure job security following the announcement that UPS will but TNT Express

TWU on alert over UPS-TNT merger
UPS-TNT merger won’t affect us: IBISWorld

By Anna Game-Lopata | March 24, 2012

The Transport Workers Union (TWU) today said it will hold meetings around the country with the management of Australian subsidiaries of the United Parcel Service (UPS) and TNT Express.

The union is responsing to the announcement early this week that UPS will buy TNT Express for US 6.7 billion ($6.4bn) to form "a global leader in the logistics industry with more than US $60 billion
($57.7bn) in annual revenues and an enhanced, integrated global network".

TWU spokesperson Barry Dunning tells SupplyChain Review the meetings are planned over the coming few weeks to ensure commitments can be secured with management on job security at the newly merged company.

Meanwhile industry research company
IBISWorld says the Australian activities of United Parcel Service (UPS)
andTNT Express are marginal so the merger of the two won’t affect
our market very much.

IBISWorld’s Caroline Finch says UPS and TNT Express have a very small share of the transport and postal market compared to domestic giants likeToll, Linfox, QR National or Asciano.

"In 2011-12 IBISWorld estimates that TNT represents 0.8 percent and UPS just 0.07 percent of the integrated Logistics market in Australia," Finch says.

"UPS and TNT combined could offer a better global network to Australian companies. However to my knowledge they aren't bringing significantly better technology or products to the Australian market."

Finch says the merger does illustrate a consolidation trend across the industry, which still has a low level of concentration.

In 2011-12 IBISWorld estimated that the top four players in the Integrated Logistics industry generated 9.8 per cent of the revenue.

Globally UPS and TNT Express are extremely significant and the merger represents a decrease in global competition.

"The merger may put downward pressure on freight rates as the combined entity takes advantage of greater economies of scale," Finch says.

"The larger entity would have increased bargaining power with sub-contractors. Again this would put downwards pressure on freight rates."

Finch says as an entity UPS-TNT might be able to achieve more competitive air freight rates, which would increase their penetration in the time-sensitive market.

"Mitigating against this is a growing skills shortage in the industry," she says

However, according to IBISWorld, the combined entity still doesn’t figure as a major player within the integrated Logistics Industry as a whole.

"A greater density of medium sized players could even increase competition within the industry, providing more choices for small operators to whom the larger players sub-contract, particularly in road freight forwarding," Finch says.

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