If you are planning to invest, buy or sell in the diverse and crowded transport sector, nationally or internationally, it is important to realize your options stretch much further than merely road, rail, air, or water networks. It also incorporates supply chain, cables, space projects, vehicle manufacturing, transport planning, and traffic management.
The national and global transportation sector is a vast collection of thousands of companies, units, and assets. Many of them require different technical knowledge and investment strategies. In a nutshell, the transportation sector consists of several industries including air freight and logistics, airlines, marine, road and rail, and transportation infrastructure. These industries are further broken down into sub-industries air freight and logistics, airlines, marine, railroads, trucking, airport services, highways and rail tracks, and marine ports and services.
When looking at investment opportunities in the automotive transport sector, it is important to realise that commercial vehicles are exposed to higher cost pressures than for example car manufacturers, as road freight transport companies operate on purely economic logic when acquiring new equipment.
Freight transport entities are not easily persuaded to implement new and innovative technologies unless they reduce their overall costs. Also, trucks and vans are increasingly subject to strict regulation. In some cases, they are not even allowed to enter city centres or enter specific zones during rush hour. So generally, they are exposed to an increasingly volatile market but do benefit from the massive boom in last-mile logistics.
For freight transport services, such as trucking, delivery and postal services, competition is unprecedently high. The relatively low entry and exit barriers in road freight transport, paired with fierce competition, make road transport firms a complex place to invest in, but our team has years of experience navigating this ecosystem and can tell you which factors and metrics to pay particular attention to when pumping equity in a particular firm, sector or transport unit.
Competition levels in the airline and aviation industry have increased to such an extent that economic and financial success is far from guaranteed. Without proper specialist advice it may prove impossible to navigate this unpredictable market with major challenges in one region but huge opportunities in another. In some cases, air transport is cheaper, more efficient and preferred over road or rail.
It is increasingly busy up in the air, with competition increasing, even though Belgium and most European countries are controlled by just a few leading airlines and the aircraft manufacturing space is dominated by merely a few large players, such as Airbus, Boeing, Dassault, Bombardier and Embraer. There are also just a handful of helicopter manufacturers, with this sub-sector being led by Boeing’s Hughes and Airbus Helicopters, better known as Eurocopter. With a limited number of players, it means the scale and reach of investments are significant and potentially very lucrative.
Just as with most road transport companies, regulation is a major hurdle for the industry, which should not be underestimated when making an investment. But also fuel costs, unexpected market changes such as the pandemic and innovation determine an aviation company’s earnings and profits. Finally, since the industry is exposed to extremely strict safety and security requirements our team would be delighted to tell you more about how and where to spot investment opportunities at 10,000 feet.
Many investors in the rail industry say this sub transport sector has the most promising future: a darling of regulators because of its environmentally friendly character and relatively low and stable costs make this a relatively safe investment.
Nevertheless, safe and stable does not mean returns have to moderate. Finally, since the industry is exposed to extremely strict safety and security requirements our team would be delighted to tell you more about how and where to spot investment opportunities at 10,000 feet.
Our team of experts has years of experience identifying lucrative and both short- and long-term investment opportunities in Belgium, France, the Netherlands and the rest of Europe, the largest rail network region in the world. Despite some European markets, such as the UK, Netherlands and France, opening up rail networks to more competition, the rather limited number of players, particularly in comparison with road transport firms, make this an attractive proposition as many rail companies hold a near-monopoly position in the market or region where they operate.
Cargo and freight ships are an environmentally friendly alternative to flying and, together with trucks, the direct competitor of trains. The transport of goods is relatively slow, but so are the costs: low and stable. With regulators on investors’ side and more harbours competing with each other, investing in cargo companies and water transport firms is an attractive option to generate long-term results.
In addition to cargo, more and more cities and regions are connected by ferries as the airline industry is under pressure and people are encouraged to get out of their cars. Our team can give you a detailed, problem-solving and comprehensive overview of how and where investments in water transport make sense and why many private equity firms, family offices and other investors are choosing to take their cash to the sea.
For any investor that plans to buy or sell in the transport, it is paramount to gain a proper understanding of how the sector works, which operational aspects need to be taken into consideration and what an enterprise’s growth model is in the medium and long term. Our team has not just years of experience advising clients on these considerations, but they can also tell you why and how the performance of companies in the transport industry is sensitive to fluctuations in company earnings and the price, rates and tariffs of offered services.
Some of the main factors that will inevitably affect the earnings of any transportation company are, among others, fuel expenses, labour costs, services and market demand, geopolitical events such as the international oil market, trade protective policies and the pandemic, as well as consequences in the global economy post-pandemic, such as new ways of importing and exporting.
Government regulations, particularly policies aimed at the environment, have started to affect the sector immensely, particularly road and air transport companies. Many of these factors are interconnected. For example, if the Belgian government passes new rules that make it more challenging for obtaining a commercial drivers’ license, this may result in a dip in the number of available truck drivers, in turn pushing up the cost of hiring skilled and qualified drivers.
Naturally, for the vast majority of transport companies, oil prices are a key factor for the company’s costs and expenses. When gas and fuel prices are under pressure and increase, the costs for transporting goods via cargo ships or animals via trucks will inevitably jump up. This may ultimately eat into the business’ earnings, dampening its profits and potentially lowering its stock price.
One of the best examples of the crucial role of fuel costs is in the aviation industry.
Years of relatively low and stable oil prices helped to boost the value of airline stocks. Investment in the industry took off in earnest and fresh equity was pumped into dozens of establishing, new or budget airlines around the world. After all, new and existing airlines managed to keep fuel costs under control, thereby increasing their profit margins and helping to boost the valuation of airlines.
An ‘oil war’ between Russia and Saudi Arabia earlier this year further pushed fuel prices down, to the delight or airline managers and investors. Naturally, that was until Corona popped up and the industry came to a sudden halt. In order to recover from this, professional advisors may need to come on board to make sure your transport investment does not veer off too far of course.
One way of investing in transport companies that move people and products is by buying shares of individual transportation companies, or through so-called sector-specific mutual funds or exchange-traded funds (ETFs) that specialize in the transportation sector. Direct acquisitions and investments are increasingly common, with companies taking a direct stake in an entity. Our team would be delighted to tell you more about that.
Since the transportation sector is one of the most broadly diversified investment spaces, with industrial companies representing airlines, railroads, truckers, equipment and leasing stocks, and logistics companies, our team would be thrilled to tell you more about their investment and proposals in aviation, bus and coach, light rail, tram and metro services, rail, taxi and private hire, water transport. freight transportation, maritime and port operations, postal and courier activities or warehousing, storage and handling. Our dedicated ROD Transports team is specialised in the latter and would be happy to tell you much more about this.
Since transport is one of the most exciting investment ecosystems within commercial real estate, and our team represents dozens of investors, developers, and other committed players, we would be thrilled to tell you more about our investment strategies and client proposals.