TNT EXPRESS, the Dutch mail-delivery group being bought by UPS, has reduced European capacity by up to 15 per cent in response to falling demand and is concerned economic growth may remain weak this year, an executive said yesterday.

The comments came as TNT reported a 67 per cent increase in second-quarter operating profit to €77 million ($95.3 million) on sales of €1.83 billion.

“We’ve taken out the capacity and that is yielding some good cost results,” Bernard Bot, chief financial officer, said.

“We are eying Q3 and Q4 with some concerns given the macro economic conditions and what some customers are telling us.

“The economic crisis has led some customers to shift from premium to cheaper delivery services. That boosted demand for economy shipping of goods.

“That has impact on overall price. Our yields and the overall price we are able to get are down in Europe, the Middle East and Africa.

“TNT is also sharing excess capacity with Emirates Airline on Singapore and China routes to offset a sharp volume decline, Bot said.

TNT Express said earlier yesterday it expects “increasingly challenging” conditions in Europe and Asia Pacific this year, but gave no specific earnings forecast.

TNT shares were largely flat by 10.10 GMT, while the Amsterdam index was 0.9 per cent higher.

UPS is expected to complete its €5.2 billion acquisition of TNT Express in the fourth quarter of 2012, although EU regulators are reviewing their combined market share.

Mr Bot declined to give details about a possible spin off of assets, saying only that it was co-operating with authorities in Brussels. A decision by EU regulators is expected by November 28th.

Analysts had already warned that the deal would give UPS a dominant position in some markets, such as Britain, and that as a result it would have to sell assets to soothe regulatory concerns.

Analysts have estimated that in the UK, TNT and UPS have a combined market share of about 35 per cent, while in Germany and France their share is about 30 per cent, and in the Netherlands it is below 30 per cent. – (Reuters)