Incorporated: 1962 as Thomas Nationwide Transport Limited
Sales: A$4.83 billion (US$3.67 billion)
Stock Exchanges: Sydney London Wellington
TNT Limited is the world’s largest diversified transport group in terms of sales, a huge conglomerate providing air, land, and sea freight transport for anything from a single envelope to a crate of machinery. Although based in Australia, which was the limit of its activities for its first 20 years, the company is now a major carrier in Europe, North and South America, South East Asia, and New Zealand, following an energetic international expansion program begun in the late 1960s. This expansion, driven by TNT’s managing director, Sir Peter Abeles, has transformed the company’s structure to the point where international operations have begun to displace Australian business as the heart of the company’s activities.
TNT began in 1946 when Ken W. Thomas started operating a one-man trucking business in Sydney, Australia. After several years of steady growth, he incorporated the business as a private company in 1951. Continuing growth over the next decade, with the expansion of the company’s fleet and extension of its routes across Australia, led to its incorporation as a public company in 1962, under the name Thomas Nationwide Transport Limited (TNT), and listing on the Sydney Stock Exchange the following year. Access to public funds allowed the company to continue expanding until, as the end of the decade approached, the limits of the Australian trucking market became apparent and TNT began to look for opportunities to extend its business beyond Australia. The chance came in 1967, a key year in TNT’s history, when the company merged with another growing Australian transport enterprise, the All-trans Group. Like TNT, Alltrans was another company that began in a small way in the optimistic environment of postwar Australia. One of Alltrans’s two principal shareholders, Peter Abeles, was a refugee from war-torn Hungary. Abeles stepped off a ship in Sydney in the late 1940s with £4,000. With a partner, George Rockey, he bought two trucks on time payment, named them Samson and Delilah and, like Thomas, set about building up his business. Abeles would spend weeks driving his car through the Australian bush, drumming up contracts for the fledgling business. Although the merger with TNT involved discarding the Alltrans name and Thomas remaining head of the merged group, Abeles soon emerged as the driving force in the company, its key strategist and its public face.
The merger gave TNT its first international operations via Alltrans’s activities in New Zealand, which had begun in 1964. The size of the new group gave it the base required to begin expanding internationally. TNT began an ambitious international acquisition program, starting with its entry into the tough U.S. trucking industry through the purchase of a California truck line, Walkup’s Merchant Express Inc., in 1969. In 1970 TNT bought Gill Interprovincial Lines in Canada, and acquired one-third of a shipping company, Bulkships. Over the next two years, the expansion continued with the purchase of another Canadian operator, Scott Transport, one-sixth of the Union Steamship Co. of New Zealand Ltd., and TNT’s entry into the U.S. air transport business through a joint venture with Shulman Transport Enterprises Inc. In 1972 the company also opened a small office in the United Kingdom, its first European presence. These swift moves were not without problems, however. The U.S. trucking industry is a very difficult market for a newcomer. TNT’s efforts to move into this market were accompanied by a series of wildcat strikes, mysterious bombings, and arson attacks. The damage caused by this interference was the first in a number of problems that would affect TNT’s U.S. operations for years.
The company continued with its acquisition plans, aimed at attaining Abeles’s vision of an integrated global transport operation. In 1973 TNT went into partnership with two West German companies to form an international ship brokering company, Montan TNT Pty Ltd. It also formed Kwikasair Ltd., an express delivery service between the United Kingdom and continental Europe. TNT’s U.S. base was also expanded, through the purchase in the same year of Overland Western Ltd., a trucking company operating in Ontario and New York and Michigan; and Acme Fast Freight Inc. The company also began developing a strong South American presence in 1973 when it bought 70% of the Brazilian transport group Pampa OTT and established Kwikasair Brazil.
It was TNT’s activities within Australia, however, that suddenly brought the company to international attention in 1972. TNT had continued to grow steadily since the 1967 merger, and it was well on its way to becoming the country’s dominant transport group. In 1972 the company tried to accelerate the process by launching a hostile takeover bid for Ansett Transport Industries Limited (Ansett), the operator of one of Australia’s two major domestic airlines. Protected from free competition by a government-endorsed airline duopoly, Ansett was a highly profitable company that would have secured TNT’s position as Australia’s leading carrier. Ansett’s chairman and founder, Sir Reginald Ansett, was a tough adversary. At the height of the battle he called on the Victorian state government, headed by his personal friend Sir Henry Bolte, for assistance. The government ruled that it was unacceptable for a company based in Victoria to be taken over by a company from New South Wales, and stopped the takeover. TNT withdrew with 23% of Ansett’s shares, but kept a close eye on Ansett.
The failed bid for Ansett did not stop TNT’s international growth program, which continued through the mid-1970s with a series of acquisitions—particularly in the United Kingdom and Canada—which the company was using as launchpads for later growth in Europe and United States respectively. In 1975 Abeles foreshadowed the company’s next international step when he launched an attack on international shipping conferences and the effect these cartels had on the global transport industry and trade prospects. The following year, TNT directly challenged one of the most powerful of these cartels, the North Atlantic Freight Conference, comprising some of the world’s largest shipping companies, by operating a non-conference container shipping service, Trans Freight Lines, on the Atlantic run.
Ten years after the merger between TNT and Alltrans, TNT had become Australia’s major transport group, despite its failure to take over Ansett, and was a growing presence internationally. The group’s annual revenue had increased tenfold from A$46 million in 1967 to A$462.7 million by 1977, while its after-tax profits had risen over the same period from A$956,000 to A$15.3 million. Such a swift expansion, however, had left the group exposed to a wide range of fluctuating markets and economies. TNT had bought heavily, was a relative newcomer in many of its markets, and was losing money from some of its operations in the difficult U.S. market. In 1977 to 1978, for the first time since its public incorporation in 1961, TNT’s profits fell.
The company responded with a recovery strategy aimed at rationalizing its international activities to cut out the weaker activities and build up other operations to the point where they were more prominent than the Australian operations. The program began in 1979 with the sale of the U.S. trucking company Acme Fast Freight, which had lost money every year since being acquired in 1973. The group also cut a loss-making stake in Nigerian Shipping Operations from 100% to 25%. By 1980, the company projected, more than half of its profits would for the first time be earned outside Australia. These projections were overshadowed later in 1979, when a new takeover battle for Ansett Transport Industries Limited began. With Sir Henry Bolte gone and a more liberalized corporate climate in Australia, two groups, Ampol Petroleum and Bell Resources, began buying Ansett shares heavily. TNT entered the battle, which also involved Rupert Murdoch’s The News Corporation Limited. Just as the latter emerged as the likely victor, it suddenly became clear that TNT’s stake was large enough to prevent Murdoch’s company from taking control. The two companies agreed to share control of Ansett, with 50% each. Ansett’s operations included a major Australian domestic airline—Ansett Australia, freight services, and tourist resort operations.
The cash flow provided by its share of Ansett gave TNT renewed strength to pursue its international expansion plans. The company changed its international focus to concentrate on the United Kingdom and Europe as its most important growth area. This focus became clear in October 1980 when, sponsored by the British merchant bank Hambros, TNT was listed on the London Stock Exchange, after removing itself from the Toronto and Vancouver exchanges earlier in the year. TNT was now well placed to expand into Europe, although it continued to look for openings in the United States, buying another trucking and warehousing company, Pilot Freight Carriers, while Trans Freight Lines doubled its size by buying another container line, Seatrain International.
The impact TNT’s services were having in its new markets was indicated in 1982 in a confidential U.K. Post Office report that stated that a new TNT private parcel delivery service, Homefast, would pose a serious threat to the Royal Mail parcels network. TNT took a significant step toward building a European freight network in 1983 when it bought Skypak, IPEC Holdings Ltd.’s international courier operations, which operated in 26 countries. Combined with TNT’s existing courier networks, this gave the group bases in 49 countries and provided access to Middle and Far East markets. Four months after the Skypak acquisition, TNT bought IPEC Europe, the leader in the European international express freight market, complete with more than 60 purpose-built terminals and 600 radio-equipped vehicles.
With its Ansett stake and its growing international business, TNT itself became a prime candidate for takeover in the early 1980s. One of Australia’s most skilled take-over operators, Robert Holmes à Court, stalked TNT through 1981 and 1982 but was held off, although at one stage Ansett and another of TNT’s associates, Mcllwraith McEachern Limited, were called upon to pay more than A$60 million for a strategic stake in TNT to protect it from predators.
The vulnerability of a widespread transport group to the cyclical movements of economies became clear again when the company’s profits plunged by half in 1982 to 1983. A recession in Australia had severely cut freight volumes, while in other markets competition had forced TNT to reduce its rates and thus its profit margin. TNT continued to pour money into expansion, however, opening a steady stream of operations and services in the United Kingdom, where it was a pioneer in the area of overnight delivery service, as it had been in Australia, and constantly looking out for new acquisition or expansion opportunities in Europe. In view of its international emphasis, the company changed its name in 1985 from Thomas Nationwide Transport Limited to simply TNT Limited (TNT).
A key event for TNT’s European operation occurred in 1986 and came largely by virtue of the close relationship that had developed between Abeles and Rupert Murdoch since the Ansett takeover. When Murdoch planned to move his British national newspapers in London from Fleet Street to a new plant in Wapping, in the face of fierce resistance from the printing unions, he also anticipated problems from the unions at British Rail, which distributed all of his publications nationwide. Murdoch therefore worked closely with TNT, whose U.K. manager, Alan Jones, built up a fleet of trucks in the weeks leading up to the transfer to Wapping. The weekend before the move, Jones hired 550 drivers, and when Wapping began operating, TNT’s trucks rolled through the gates and the picket lines. For TNT the effort paid off, as the company was awarded the contract to distribute all of Murdoch’s British papers, providing a massive boost to the company’s U.K. operation. The plan also marked the end of British Rail’s dominance of the newspaper distribution market, as more publishers followed Murdoch’s lead and switched to road distribution.
In the late 1980s, TNT emerged from a period that could have damaged a company with a different approach. Faced with a recession and exposed in a number of geographical areas, TNT under Abeles spent heavily on expansion and outlasted the problems. The company was particularly well positioned in the £500 million-a-year European express-delivery market, which was growing at 50% a year. The emphasis on Europe was shown by the fact that the company’s European turnover grew by an average of almost 50% a year from when the U.K. office was opened in 1972 to 1987. By 1987 TNT had become the world’s largest diversified transportation group, with operations in 105 countries. Abeles indicated that the company was moving into a new phase when he said in the Sunday Times, June 28, 1987, “The growing pains of setting up and consolidating into a truly worldwide transportation group are coming to an end.”
From its wider base, TNT began a new series of developments aimed at furthering its reach in its existing markets, particularly in Europe. In 1987 the company sold its last shares in the U.S. shipping company Trans Freight Lines, which had been unsuccessful in its attempt to penetrate the tight North Atlantic shipping business and had lost a net A$80 million since 1976. TNT also unloaded another big loss-making U.S. operation, the trucking business TNT Pilot, which had lost more than A$60 million since 1980. In 1987 TNT made one of its biggest investments when it negotiated a right of first refusal of five years’ production of British Aerospace’s new BAe 146 Quiet Trader freight aircraft, worth an estimated total of about £1 billion, and used the first 18 planes to establish a transEuropean air express freight network servicing 17 countries.
TNT also pushed toward the goal of running a new freight airline in Europe. In 1988 it merged its European express freight division with that of its biggest competitor, Scandinavian Airline System’s Air de Cologne and bought a 75 % stake in the leading Spanish domestic freight carrier, Unitransa. It also bought KLM Airlines’ parcel express business, XP, and linked its air freight business in Europe with its road operations, creating a formidable new network, TNT Express Europe. By mid-1989 the European operations accounted for 35% of TNT’s total worldwide assets, double the proportion of just two years before. Abeles’s eyes were clearly fixed on the coming of the single European market in 1992 and his strategy of dominating the highly segmented European freight industry by offering a comprehensive range of services between and within all European countries appeared to be working.
The late 1980s also marked TNT’s extension into Eastern Europe, just in time for the collapse of the Eastern Bloc in 1989 and 1990. The company formed a joint venture with the Hungarian airline Malev in 1988, created TNT Aeroflot—a joint venture with Russia’s Aeroflot—in 1989 and started a joint venture with Yugoslavia’s airline JAT in 1990. As other countries in the region became liberalized, TNT moved toward similar operations throughout Eastern Europe. It also expanded in South East Asia, investing in joint ventures with the Philippine Aerospace Development Corporation to develop the Philippines as a regional hub.
From late 1989, however, TNT encountered a series of serious problems. The problems began in August 1989 when Australia’s domestic airline pilots resigned en masse as part of a campaign to secure a 29.7% salary increase which was outside the government’s 6% wages accord and centralized system. Accordingly, the pilots’ union’s industrial awards were cancelled by the Industrial Relations Commission. The four airlines, namely Ansett Airlines, East-West Airlines, government-owned Australian Airlines, and IPEC Aviation slowly rebuilt their airlines by employing pilots on individual contracts. This took several months and was completed by March 1990. The number of pilots reemployed was significantly lower than prior to the dispute. The dispute, which lasted for months, ended in favor of the airlines, but caused serious damage to the airlines’ revenue. At the height of the dispute, Ansett was estimated to be losing A$10 million a week. TNT’s profits for the September quarter of 1989 were 70% lower than for the same period a year before.
The damage subsided after the dispute, but hopes for a return to profit growth disappeared in 1990, when Australia, the United Kingdom, and North America fell into recession. As usual, the economic downturn hit the transport industry hard, and TNT’s broad exposure in these regions left it open to a severe drop in revenue. This problem was compounded in Australia in November 1990, when the federal government deregulated the domestic airline industry and ended the two-airline agreement which had protected Ansett’s share of the air market for so long. Compass Airlines, a new company headed by a former Ansett employee, entered the market and began offering big fare reductions, forcing Ansett Australia, East-West Airlines, and Australian Airlines to introduce fare discounts of up to 61%, further slashing revenue.
These problems caused a surge of concern in financial markets about TNT’s capacity to generate liquidity in tough times. In January 1991 the company’s share price on the Australian Stock Exchange fell to a record low of A75C. Due to the unfavorable market conditions, the company decided not to issue A$200 million of preference shares, issuing later, in April 1991, 50 million new ordinary shares of A50C at a premium of A$1.00 to ease its liquidity problems. The hardest blow came in May 1991, when TNT revealed that it had lost nearly A$90 million in the nine months to the end of March 1991.
In July 1991 the company announced the establishment of a joint venture (50/50) between its own TNT Express Worldwide and five major post offices incorporated under the entity GD Net BV, comprising the postal organizations of Germany, France, The Netherlands, Sweden, and Canada to effect high-quality time-certain delivery services with global coverage. All regulatory approvals have been given for this joint venture and the aim was to close it in the first quarter of 1992; the effective date was October 1, 1991.
TNT Australia Pty. Ltd.; TNT Express Europe B.V. (The Netherlands); TNT Transport Group Inc.; TNT Shipping & Development Limited; TNT (U.K.) Ltd.; TNT Canada Inc.; TNT Brasil S.A. (85%).