By Mike Wackett
A least 4,000 of Maersk Line’s 23,000 global land-based staff are facing redundancy before the end of 2017, as the world’s biggest container line adapts to a depressingly weak demand outlook. This is the first significant cutback in staff for the carrier since 2012, when it shed 250 senior staff at its Copenhagen headquarters after a $1 billion losing streak in 2011 and 2012.
Chief Executive Soren Skou said on November 4 that Maersk Line would cancel another 35 sailings before the end of the year, in addition to the four service closures it has already announced, and would reduce its network “throughout 2016”.
The unscheduled conference call for media, ahead of Maersk Group’s third-quarter results on November 6, shows just how serious the situation has become. On October 23, the company reduced its 2015 profit outlook for Maersk Line by $600 million, after a “significant drop in rates” on its key Asia-Europe trade, caused by weak demand and an oversupply of capacity.
The damage to the carrier’s profitability seems mainly to have come in the final month of the third quarter, but was said to be “continuing into October”. Announcements since suggest that even more havoc has subsequently been wreaked on its bottom line. “We are on a journey to transform Maersk Line. We will make the organisation leaner and simpler,” Mr. Skou said, in a statement that showed similarity with the downsizing strategy he announced in June 2012. At that time Maersk Line employed 25,000 people worldwide. “We are fewer people today than a year ago. We will be fewer next year and the following year,” said Mr. Skou, and added: “Maersk Line will follow-up the group third-quarter results with more detailed information on Monday.”
Maersk Line said that the redundancy programme would save the company $150 million next year and a further $100 million in 2017. Despite bottom line savings promised from the “standardisation, automation and digitalisation of processes”, its top line revenue could be threatened by the headcount reduction. However, it said it would continue to “manage capacity” and confirmed speculation that it was rethinking its orderbook. It does not plan to exercise its options for six 19,630 TEU ships and will postpone the decision on options for eight 14,000 TEU utility vessels.
If its 2M alliance partner, MSC, continues to maintain its orderbook, the Geneva-headquartered carrier would assume the mantle of the world’s biggest container line by capacity. But the privately-owned carrier will surely have suffered the same headwinds as Maersk. Indeed, sources close to MSC have told The Loadstar that voyage results between Asia and Europe have been a “disaster” in the past few months. Anecdotal reports suggest that the relationship between the two mega-carriers has “deteriorated” as results have worsened. “We didn’t sign up for this”, one executive said recently.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)