Make the introductio longer and highlight the changes made in bold, use the same writing style as well:Specialised Air Transport Services
TH40103E
Friday, 16th May 2024






 
Table of Contents
Introduction	1
Brief History of DHL	1
State of the Industry	2
Freight Forwarders	3
Regulatory Framework	3
Regulatory Regime	3
Differences from Passenger Airline Operations:	4
Business model	4
Asset-based business model	5
Operational Structure	6
Comparison of aircrafts	7
Replacement aircrafts	7
Drones	9
Conclusion	10
References	11










Figure 1National wide transport and delivery network in Germany, 2020, (Volovyk et al., 2021)	5
Figure 2 Assets and Capabilities that Enable Capturing Value in the Service Economy (Wirtz & Ehret, 2019)	6
Figure 3	747-400/-400ER freighters. (2010)	8
Figure 4Drone Industry Insights	9
 
Introduction

In today's world, logistic services have drastically changed due to globalization and emerging markets. (Cosimato & Troisi, 2015) 
DHL otherwise known as DHL Express has been a paramount figure in the specialised air transport industry, constantly reshaping the global logistics and cargo transport industry.

This report will investigate DHL's role in specialised air transport services, starting with its role as a small courier service and ending with its transformation into a leading logistics provider. Additionally, the report will analyse the industry's current state and highlight DHL's challenges and opportunities. 

The report will comprehensively explore DHL’s business model and aim to provide a refined understanding of the company’s significance within the cargo/specialised air transport industry. We are going to explore the significant history and development after its official founding in 1969.

Brief History of DHL 

As stated by DHL “ They have more than 500 years of postal history, where they went from founding the modern postal system to becoming the world’s leading logistics group”. (DHL, ND)

In 1969, Adrian Dasley, Larry Hilliblom and Robert Lynn founded DHL in San Francisco. The name DHL derives from the initials of their last names. (DHL, Nd)
They started with an innovative approach: Transporting cargo/mail via plane instead of ground transport between San Francisco and Honolulu. They also simplified and processed customs before the shipment arrived, which contributed to reducing wait times for cargo processing.

This advanced approach to customs saved their customer’s time and solidified their role as pioneers in the express delivery industry.  

After Deutsche Post acquired DHL in 2002, the year after, DHL consolidated its own logistics and specialised transport operations under the DHL brand, which further illuminated its global presence in the industry. This consolidation process involved various rebranding efforts, including redesigning 20,000 delivery vans with the new DHL design. The new DHL brand represented speed, modernity, and global reach on an enhanced level due to its large family. 

Additionally, this allowed DHL to implement its “one-stop shopping” concept, where they could offer various services from one single source. (DHL History, ND). While the consolidation benefited the company, it also posted significant challenges, such as the need for investments and coordination between the various business units. (DHL History, ND)
State of the industry 

The specialised air cargo industry is evolving continuously and necessitates continuous adaptation to enhance safety and efficiency. This involved advancements in ground handling technology to newer and more efficient aircraft. Whilst today’s aircraft and processing warehouses have changed significantly, some of the fundamental concepts of cargo remain the same. Processes include offloading from transport aircraft, loading cargo onto vehicles, and pallet/container operations. They have persisted despite the trend of automation in the cargo processing and customs sector. (Morrell & Klein, 2018)


Improving these areas is heavily dependent on effective information management, this is derived through information technology (IT), which catalyses all logistics. 
The use and integration of virtual and augmented reality will be decisive in further efficiencies, as ultimately, IT will be a prevailing factor in the success of the air cargo industry and logistics. (Morrell & Klein, 2018)

Freight Forwarders
Freight forwarders play a crucial role in today’s cargo industry as most air cargo is booked through various freight forwarders. According to (Sales and Scholte, 2023),  Freight forwarders consolidate large quantities of cargo with airlines to get a better-negotiated price. They can be either local or international. The client who wants to ship the cargo selects a freight forwarder, who then negotiates a price that the client would otherwise not get. This is because they have an almost monopoly due to the large concentration of cargo space. (Thomas Van Asch, 2022)

The reason behind their prevalence can be attributed to forwarders handling various tasks, such as picking up, custom packaging, and dealing with customs. They can also arrange ground transport for the cargo to and from the airport, more commonly known as the road feeder service(RFS). They can also provide RFS when the cargo gets to its arrival airport. (Sales and Scholte, 2023)
Regulatory Framework
DHL operates under a distinct regulatory framework compared to passenger airliners. This disparity arises from the companies' objectives, including safety requirements, business goals, and aircraft types, resulting in different applicable regulations for each sector.

Regulatory Regime:

Logistics and cargo companies, such as DHL, are primarily governed by the national transportation authorities alongside international bodies such as the International Air Transportation Association(IATA). Cargo airlines must meet the rules on aircraft operations, safety standards, and cargo handling set out by the National Transportation Authority and ICAO. Stringent regulations oversee the transportation of hazardous goods, live animals, and cargo handling.

Differences from Passenger Airline Operations:

The primary distinction between cargo and passenger airlines is their emphasis on prioritising the safety of those on board. Passenger airlines undergo thorough screening and other procedures to ensure the safety of all passengers. Cargo airlines also uphold high safety standards, focusing on the secure and efficient transportation of goods.

Morrell and Klein (2018, p 80) argue that advanced economies have transitioned their emphasis from economic regulation to restricting traffic rights and enhancing consumer protection. Alliances, particularly those involving the US and EU, are under close scrutiny. Although bilateral agreements between the US and EU have shown progress, further liberalisation has encountered obstacles, particularly in cargo aviation.
Business model

According to (Volovyk et al., 2021), the rankings of a cargo/logistics company’s position in the global top 10 companies does not depend on their business model, thus the top 10 global cargo/logistics companies are filled by operators such as DHL and Amazon, as they are asset-based business models with various solutions.

The top 10 spots are also filled with competitors who adhere to a different business model, the asset-light business model.



 
Figure 1National wide transport and delivery network in Germany, 2020, (Volovyk et al., 2021)

Asset-based business model
An asset-based business model involves making strategic decisions regarding the ownership of a company’s assets to capture optimum value effectively. This model consists of several asset categories: physical assets (e.g., Aircraft, Unit Loading devices, Warehouse space, Proprietary Equipment), market-based assets(e.g., brands, networks), intangible assets( patents, legal protection), and social-based assets( trust and relationships).
Each type of asset can be seen as either something tangible ( e.g., equipment) or intangible, such as relationships and trust. (Wirtz & Ehret, 2019)

 
Figure 2 Assets and Capabilities that Enable Capturing Value in the Service Economy (Wirtz & Ehret, 2019)

The assets are organised into a typology framework, which focuses on their different attributes and how they are important for creating value. Additionally, organizational skills such as customer-centric culture, innovation, and efficient processes play a critical role in using those assets effectively to capture optimal value. (Wirtz & Ehret, 2019)

Operational Structure 

DHL’s operational structure is predominately focused on an asset-based business model, a model that is highlighted by its strong aviation division, which serves as a foundation for providing its logistics and transport capacity. Its aviation allotment compromises a collection of airlines that are strategically linked with DHL Express. (Volovyk et al., 2021)

The airlines are either fully owned by DHL or co-owned and chartered by DHL. Amongst the prominent airlines are DHL AIR UK, AHL Aero Expresso, SNAS/DHL, Blue Dart Aviation, etc. All of these airlines play a vital role in expanding DHL’s logistical reach across different parts of the globe. Additionally, they function as crucial components of its extensive network and supply chain. (Volovyk et al., 2021)


DHL differs from its traditional competitors because it applies a forward-facing approach to its business, as apparent in its venture into electric aviation.
In a pioneering move, DHL Express ordered 12 electric cargo-only aircraft from the start-up Eaviation. According to DHL Global (2023), this initiative aligns with their broader sustainability goals, and they can leverage cutting-edge technologies to help drive positive environmental outcomes. (Volovyk et al., 2021).The top 10 spots are filled with competitors who adhere to a different asset-light business model.


Comparison of aircrafts
The DHL group’s fleet is diverse ranging from old Beechcraft 1900D to brand new state-of-the-art Boeing 777F. (DHL, Fleet information Nd). The fleet group is meticulously selected to meet and cater to the unique demands of different geographies globally. 
Replacement aircrafts 
DHL placed an order for nine mammoth-converted Boeing 777-200LR freighters, and the first delivery is expected to be in 2024 and the last ones by 2027. This is a strategic move from DHL to modernize their long-haul fleet by replacing older inefficient aircraft with newer models. (DHL Express upgrades its fleet with the order of nine mammoth-converted B777-200LR freighters 2023)

This move is to replace its legacy 747-400F, which has a maximum payload capacity of 112,990Kg and is loved by cargo airlines worldwide. It has a big payload and can be refitted to accommodate most types of cargo. (747-400/-400ER freighters, 2010)


Although the B777F has a maximum payload of around 102,000 KG, it offers a longer range at 9,200 kilometres. Additionally, it is more fuel efficient and reliable and drastically reduces CO2 emissions compared to the B747-400F.
This is possible due to its GE90-110 engines and their exceptional performance. The aircraft also has an advanced wing design, making it more aerodynamic and accomplishing superior cruising speeds whilst consuming less fuel. The aircraft also meets the strictest noise-protection standards currently applicable in international aviation. (B777F - Lufthansa cargo ND)

Furthermore, this move aligns with DHL’s sustainability goals and strengthens its global fleet network, consisting of over 300 aircraft throughout 220 countries. These investments emphasise DHL’s strengthening of its assets to capture evolving market demand. Additionally, it also ties in with its asset-based business model. DHL’s sustained growth can be attributed to its adherence to an asset-based business model, which continuously invests in its assets(e.g., aircraft, trucks, warehouses). This helps DHL position itself at the forefront of the logistics and cargo industry. DHL, Fleet information Nd)




Drones:
Drones, or unmanned aerial vehicles(UAVs) are controlled remotely or autonomously via the use of software and device sensors.  There is a capacity for quick, point-to-point shipping, but it hasn’t been developed extensively. This is due to regulatory, technological and economic challenges. (DHL, Trends Nd). However, drones are already impacting transport options and saving time and resources in Finland. Last-mile drone delivery is becoming more significant, with regularity bodies allowing approval.
DHL expects increased drone use in the logistics industry, as they place drones in relation to their duties in logistics.(DHL, Trends Nd). The rapid evolution of drone tech calls out outdated aviation treaties to be updated. There have been advancements in size, efficiency, and Emissions. (Hodgkinson and Johnston, 2018, 111). 
These advances will severely impact the aviation and logistics industry on various levels. Drones already started impacting the market through delivery security monitoring and wildlife conservation. However, there are still concerns over societal disruption, particularly regarding data privacy and infringement. Hodgkinson and Johnston, (2018, p111).
Overall, drones have taken longer to be commercialised to their full potential than initially anticipated. Shifts in regulations regarding drones and UAVs for security and last-mile deliveries are getting more permissive, thus enabling more drone operations in logistics. DHL is anticipating further adoption of drones in their logistics operations as the business becomes more favourable. (DHL Trends, Nd).






Conclusion:


In the face of globalization and emerging markets, logistics services have radically transformed, leading to a significant impact on companies like DHL. From its beginnings as a small courier service in 1969 to its current status as a global logistics giant, DHL has consistently been at the forefront of innovation in the specialized air transport industry. This report has delved into DHL’s journey, highlighting its strategic evolution, the challenges it faces, and the opportunities ahead.

The specialized air cargo industry, characterized by constant evolution, necessitates continual advancements in safety, efficiency, and information management. Improving these aspects, particularly through technological innovations such as virtual and augmented reality, is critical to the industry’s success. Freight forwarders also play an indispensable role in the logistics ecosystem by efficiently consolidating and negotiating cargo space.

DHL’s asset-based business model, which includes a strong aviation division and recent ventures into electric aviation, exemplifies its forward-thinking approach. The company’s ongoing investments in technology, such as drones for logistics, underscore its commitment to staying at the cutting edge of industry trends.

The regulatory framework governing cargo airlines like DHL differs significantly from passenger airlines, driven by distinct operational objectives and safety requirements. Despite initial progress in liberalising air transport regulations, further advancements, especially concerning ownership rules, have encountered obstacles.

Overall, DHL’s sustained growth and industry leadership can be attributed to its strategic asset investments and adaptability to evolving market demands. As the logistics landscape continues to transform, DHL is poised to maintain its influential role, leveraging its comprehensive business model and robust operational structure to meet the challenges and opportunities of the future.
References 

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