Good morning, everybody. I first want to welcome everybody here and thank you for coming to our first-ever investor conference here at Seattle. I know it's a little bit of a journey, but I really appreciate you coming here. And I think we have a pretty good presentation set up for today. But like most presentations, we're going to start with a safe harbor statement. So please take a moment to read this. The presentation will include some forward-looking statements, so we want to make sure that everybody's cognizant of this. And our risk factors are included in our 10-K and updated in our 10-Q. So I just want to make sure that we all reference this from what we're going to talk about today. And with that, I'll turn it over to our President and CEO, Jeff Musser.
Thank you, Brad. Good morning. How's everyone?
Now that Brad took all the fun stuff out of here, maybe we can get started. I thought I would start with one slide. I think this is a question that a lot of folks keep asking about Expeditors, that why the Investor Day now, what's changing the organization, why is this important to us. And I kind of felt that was the elephant in the room that needed to be addressed, first off. And whether deserved or not, I think over the years we've developed a reputation as being maybe difficult to talk to at times, hard to get a hold of. Some of that's probably true. Some of that's probably not true. We do spend a significant amount of time talking to folks, and we have a very specific model in which we communicate. But we do want to reach out. We want to make ourselves available.
We thought that starting with this Investor Day would be a great way to provide more access and provide more information to folks. So that's why this is occurring today. But some things won't change. Our communication philosophy largely does not change as an organization. We believe strongly that our numbers that we post each quarter should speak for themselves. That talks about our performance. That's a report card on how we're doing. Those are the numbers that we think everyone should refer to and look at those numbers and identify what that means in regards to Expeditors and where we're going. We think our 8-K is the right model to continue to communicate, to allow investors and analysts to ask questions of us. And it provides us an opportunity to provide responses and also to provide additional color on some of the questions you may have.
I realize at times maybe we've missed that. We've worked very, very hard to get back on track with our 8-Ks. And then whether you know this or not, we do present at select conferences. This year we're presenting at a total of three conferences. We generally make ourselves available after those conferences. So Brad and I are typically available for questions after that. But another important point is management's main responsibility. When I think about management, our biggest responsibility, while it's important for us to meet with the investment community, our biggest responsibility is actually running the business on a day-to-day basis. That requires us to create the vision, to focus on execution, focus on our measurements, and focus on the reporting. That takes a significant amount of time.
That requires us to be meeting with our customers to maintain the existing business we have today, but also meeting with our customers to gain new business. It also requires us to be in front of our employees. We very much value our employees, and we spend a significant amount of time telling our story to the employees, helping them understand how they fit in the organization and where we're headed as a company. That's where a big chunk of our time goes. And going forward, we don't expect major changes in our communication philosophy. We'll continue to provide most of our answers through 8-K, and we don't have any intention of starting a process where we have quarterly calls. Quite honestly, after this day is over, we'll regroup as a team.
We'll identify what we thought worked well, where we thought there was opportunities to improve, and then we'll make decisions on what this means going forward, whether this is an annual meeting that we hold, whether it's something we do every other year, whether it makes sense to hold it here in Seattle or in New York or other parts of the country. We'll go back and we'll capture all the information and make some decisions going forward. Fair enough? Excellent. So our agenda today, here's what we plan to cover. I'm going to start with a high-level company overview. I realize most of you are familiar with Expeditors, but I think it's important to start with an overview on who we are and really what we do. Brad will then step in and talk about our financial results and provide some color and detail on that.
This is where one of our changes comes into play, where you're going to start having access or seeing some more of our management team that you may not have met in the past. Dan Wall, who has recently promoted to the position of President in charge of our global products. Dan will talk a little bit about our structure of geography products and services. And then as Dan has most recently been in the ocean product position, leading that role, he'll talk about the ocean market. Following Dan will be Jose, our Senior Vice President of our air product. And Jose will give some updates on the air market, what we see happening in the air market. And then following Jose will be Chris McClincy, our Senior Vice President and our CIO, who's responsible for the IT at Expeditors.
We think that's going to take a couple of hours to go through that presentation, to go through all those presentations. And we'll end with 1 hour to 45 minutes of questions. We're going to ask you to hold the questions until we're finished with the presentations. We're afraid if we start taking questions through the process, we'll never actually get through the presentations. And I think we likely will answer a lot of the questions you might have along the way. If we realize three hours is a long period of time, if you need to sneak out and use the restroom, please feel free to do so. They're right in the back. If you need to make a phone call, please feel free to do so.
There's some private rooms with sliding glass doors that you're more than welcome to use as well too for your phone calls. Okay? So my agenda today, I'm going to start with a high-level company overview, some details on Expeditors. I'm going to talk a little about our differentiators, what we think provides us some competitive advantage. And I'll talk through that. And I'll spend a significant amount of time on changes that occurred in the organization beginning in 2013. And I'll start with a continuum in 2013 ending to today, going through those changes. I'll then drill into specific details on our geographic structure because we had some major changes there, our organizational structure because we had some major changes there, and then strategy. And there's been a lot of questions about strategy. We've talked about it at a high level in our 8-Ks.
We've also talked about it in our financial press releases, and we'll provide a little more information on that. And then I'll end with what doesn't change. So starting with the highlights, Expeditors, many of you probably know this, but you may not know this, we were founded in 1979. But we weren't founded as the company that we are today. We were founded as a small ocean freight forwarder in the Seattle market. And believe it or not, we focused on ocean exports out of Seattle. And we focused on commodities, peas, beans, and lentils. That's really where Expeditors started. But the Expeditors that we've all come to know today, that company really started in 1981. And what happened in 1981, the founders that we really recognize as our founders today joined the organization. And we opened offices in San Francisco, Chicago, Hong Kong, Taiwan, and Singapore.
Our focus at that point in time was moving air freight out of those markets in conjunction with customs clearance in the United States. That's what really began this company that we know today. We're headquartered in Seattle, Washington, and really have been since day one. We have regional headquarters in our geographic locations in London, Dubai, Singapore, and Shanghai. Then today we employ roughly 15,000 employees. Our 2014 revenue numbers were about $6.6 billion in revenues. Obviously, the stock is traded on the NASDAQ market with the ticker symbol EXPD. We're a Fortune 500 company. We're part of the S&P 500, and we're also a NASDAQ 100 company as well too. Gives a little flavor on who we are. From a geographic reach standpoint, I've displayed a map up here, and I realize some of this is hard to see.
The red dots indicate the Expeditors offices, whereas the blue dots indicate agents that we work with. You can see that we're pretty well situated throughout the globe. In our financial press releases, we tend to talk about full-service offices. Our last financial press release talked about 186 full-service offices. That's true. We have 186 full-service offices, but we're actually in 253 locations. The difference there is we may have an office in one location, and they may have a satellite attached to that office. That's how we get to the 253 locations. Again, we think we're pretty well situated globally. We do believe that there are opportunities for expansion. When we think about opportunities, we look at areas like Africa, for instance. We look at Eastern Europe, including Russia. Of course, Russia certainly would be on hold if anything at this point in time.
But we do believe there are some future opportunities in additional markets as well. From a product mix standpoint, we report on three products, three distinct products: Air Freight, Ocean Freight, and Customs Brokerage and other services. As you can see from this chart, our Air Freight in 2014 represented 42% of our gross revenues. Ocean Freight represented 33%, whereas Customs Brokerage, which also includes distribution, Transcon, and other services, represented 25% of our gross revenues. That's important to us because we believe that we're very well balanced in the products that we offer to our customers. That becomes very important as customers look at shifting from Air Freight to Ocean Freight or shifting from Ocean Freight to Air Freight, the use of the truck services on forwarding. We believe that we're very well situated in offering those services to our customers and believe that we're a full-service logistics company.
The other slide that I wanted to show is the industries that we serve. Often, Expeditors is thought of in terms of retail and high-tech. It's a company that specializes in retail and high-tech. If you look at this chart, as in 2014, about 27% of our revenues came from retail. About 30% came from what we call computer services, electronics, and electrical, which we consider high-tech, which leaves a large chunk of the industries that we serve coming from other industries. When we look at that, things like healthcare, industrial, oil, and energy, those are all large pieces of our business. That's important to us as we think about where the markets go in the future. We think about areas like healthcare. As the population ages, there's more of a need for those types of services. And we believe that we fit very, very well in that market.
We also believe we fit well in that market because we think we're a high-touch company with high-level services, and those products tend to need that. So the next slide I want to talk about is differentiators in our organization. And this slide starts with our mission statement. It has what I would call our differentiators in between. Then it ends with superior financial results. And I thought it'd be important to break down our mission statement and kind of explain what that means to us at Expeditors. When we break down this mission statement, we start with the very first part of that that says, "To set the standard for excellence in global logistics." That means a lot to us. What that means to us is that we're not going to be an average player in this industry.
We're going to be the player that everybody else aspires to be, that we're innovative in our solutions and our offerings. That's what we strive to be on a day-to-day basis, and our employees understand that. The second part of that is really how we accomplish that. And we accomplish it through total commitment to quality and people and customer service. And I'll talk about people in this next section, and I'll also talk about the importance of customer service. But we believe that if we have high-quality people and they provide a high level of customer service, that that ends with superior financial results. And we talk about superior financial results to us. Superior means superior. It means better than the average player. We expect to be better.
So when we go through those differentiators, if I talk about those a little bit, looking at people, we are very much a customer service-based business. The quality of services that we provide is highly driven by the quality of people that we have working for us. We don't sell products. We don't get to show the people the products and the nice finish on the product we're producing and the high-quality materials. What we have are our people. So at Expeditors, we have a saying that we hire for attitude, and we train for skills. We very much focus on bringing the right people into the organization. We create an environment where they're trained, they learn new skills, they grow through the organization, and they take on new roles and responsibilities.
It's interesting to note that the vast majority of our turnover, when it occurs, it occurs in the very first year. And it occurs that way because people see our culture being different, and they quickly make a decision that this is a company for them to work for or it's not. And we're okay with that. And what we find is after they've been here for a year, they tend to stay for a very, very long time. That's important because they get to know our business, they get to know our customers, and they provide a much higher level of customer service, in our opinion. Systems is also something that we believe is a differentiator. And I'm not going to spend a lot of time talking about this because I think Chris McClincy will cover that.
But what I will talk about from systems is that from day one, we developed our own systems organically. They're the same systems that we use on a global scale. And we believe that's offered us some advantages that we're highly connected in the way that we exchange information with our offices and with our customers. Operational excellence. Expeditors is very much a company that is process-driven. We work very, very hard on our processes. We look for efficiency in our processes. We believe that if we have optimal, efficient processes, it results in a higher level of service to our customers. And our employees work very, very hard on continuing to drive those efficiencies and create opportunities to provide that high level of service. Innovation is on there. We believe that as an organization, we are very innovative.
We believe that we come up with new ideas and new service offerings on a regular basis. That's important. We're in a competitive industry. If we're not being innovative, our competition is on our heels, and they will be approaching our customers. That remains important to us. Our global network, I talked about the slide, and I showed you the slide of where all offices are. That's simply just a slide. What matters is the connectivity of those offices through our systems, but probably more importantly, the connectivity of the people. Our people stay at Expeditors, as I mentioned earlier, for a very long time. They create bonds and trust with each other, and those people are largely connected in how they deal with shipments and they deal with customers.
That becomes very important because every shipment that we handle starts with an origin and ends at the destination, requires people on both ends to service that shipment. Compliance is on there. We believe that compliance is a differentiator for us. Our general counsel came from a pretty interesting background where he's worked in the aviation side, and he's also worked in the chemical side. When he came to Expeditors, one of the things that he said to me is that, "Jeff, this industry is one of the most regulated industries I've ever seen." We think we know that. We think we understand that. We work incredibly hard to train our staff to bring our staff up to speed with requirements from a compliance standpoint. We think our people understand that very, very well and execute that at a compliant level on a day-to-day basis.
That's important in our industry. Our model from how we deliver our services, people often hear things like non-asset-based. That's important to us. We believe that we're a customer service-based business, and we happen to execute that in a non-asset-based model. To do that effectively, we need to manage our service providers. Jose and Dan will talk about that a little bit. Our service providers are the airlines that we work with, the steamship lines, and trucking companies. We have a very detailed process of how we engage with those folks. Then, of course, the last part is sustainability. We think that's a differentiator at Expeditors. When we think about sustainability, we think about three distinct areas. The first thing we think about is environmental stewardship. A lot of folks could look at that and say, "But you don't operate the aircraft.
You don't have the trucks. Is there opportunities for you to impact the environment?" We think there is. The way that we run our offices and the way that our lighting is set up in our offices, the way that we design air conditioning systems for our data centers, there's lots of opportunities for us to impact that. We look at things like social responsibility. Expeditors doesn't spend a tremendous amount of time talking about all the great things that we do. But I will tell you that our employees are deeply engaged in social activities, helping their local communities. The company is deeply engaged with donations to organizations that we think are worthwhile. Then the last part of that is health and safety. As I've talked about, our most important asset to us is our people.
We're very much focused on an environment that is a safe environment for our employees, and we have lots of processes that surround that to make sure that's true going forward. The last thing I want to talk about from a differentiation standpoint is our compensation model. On the left-hand side of the screen, you see a gray box there. There's four components in there. The first thing I want to talk about is our salaries. The salaries at Expeditors are relatively low compared to our competitors. Actually, I would say extremely low at certain levels compared to our competitors. That's our model from day one. We want fixed costs to be at a lower level. The next part of that, it talks about large variable compensation. That's our bonus structure, and I will talk about that a little bit. That's always been important to us.
That will always be important to us going forward. We think that ties our employees to our investors and connects us. The third part is equity through time-based options. Expeditors does have an employee stock option program. Our options vest over a five-year period: 50% vesting in three years, 75% vesting in four years, and 100% vesting in five years. We, again, think that ties us very much to shareholder return. It causes our employees to think long-term. And again, those options are only of value if we continue to manage the company correctly and drive shareholder return. And the last point on there is no perquisites. That's important to us. Many of you may have come in. You may have parked in our garage this morning. If you parked in our garage, you're paying for parking. That's no different than what I do every day.
I pay for parking in this building. When I come in every day, the parking rate that I pay is the same rate that you would pay or that any of our employees pay. We run our garage just like any other aspect of our business where it's a profit center. Our employees in the garage are compensated based upon how they run that business. But we're very conservative with the things that we offer to our employees. We think the largest portion of their compensation should come in the form of bonus. So let's talk about that a little bit. We have two pools from a bonus perspective. The first pool that we have is what we call our district bonus pool. 25% of our operating income of each branch stays within that branch.
Now, it's not exactly 25% because a portion of that also covers regional overhead paying for our regional vice president. It's in the neighborhood of 20% that stays in the branch. That money exists in the branch to pay the district manager, to pay the department managers, to pay the supervisors, and then a portion is set aside for year-end bonuses for other employees. From the corporate level, we have what we call an executive bonus pool. And I want to make sure I clarify something. The executive bonus pool, that's just not the executives that share in that. That's anybody that receives a bonus within the corporate office. So 10% of our consolidated operating income stays behind and is paid out with the executive bonus pool. We think those bonus pools drive the right behavior of both our branch operations and our executive teams.
It causes our teams to be very much focused on maintenance of our business but also growing our business as an organization. We think those bonus pools are incredibly important because with the variability, if our business begins to drop, the compensation of our employees begins to drop. If our business begins to grow, the compensation of our employees begins to grow. We don't think there's a better way to tie our employees to the rewards to our shareholders other than the bonus pool that we have in place today. That's existed from day one. We think that's a very important plan. That's a huge differentiator in the way that Expeditors is set up. There have been some changes in our compensation of our executive team, but those were not changes to the structure of the bonus plan.
Those were changes to equity and reduced percentages that those folks took in that plan. And then some other things I have up there. We think that forces our folks to drive higher levels of customer service. Our teams are always focused on how do they provide a higher level of customer service, how do they execute at a different level so that business is not at risk. We think it requires them to remain innovative with their solutions. It really creates a model where people want to figure out how they can gain more business. What sorts of new things can we do? And then it also creates the need for constant efficiencies in our branches and at the corporate level. We know we're constantly under pressure for customers to reduce costs.
We have to figure out how to become efficient and remain efficient to drive those same bonuses for our staff and our offices. So we think that's a big difference there. All right. So shifting gears a little bit, I want to talk about changes that began to occur in 2013. I'll walk through the slide. I have some backup detail that I'll go through. Again, I'll go through the geographic changes, the organizational chart changes, and then I'll go into strategy. So starting in October 2013, there was a big change that occurred at Expeditors. That big change was Peter Rose, one of our longtime founders, our Chairman and our CEO, announced that he was going to be retiring. That caused our board to go through a process of identifying who the next CEO would be to step into Peter's role.
The board went through a process of identifying, should they look externally, should they look internally? The board decided there were four candidates internally that they would look at. I happen to be standing here today because I was the individual at the end that was given that opportunity. I'm very thankful for that. But I was given that opportunity starting in December. That announcement was made. Peter stayed on board as a CEO through March. Then in March, we officially transitioned the role of CEO from Peter to myself. There were some other changes that started to occur. Shortly after that, our team got together, the executive team got together, and focused on a strategic assessment. I'll dive into a lot more details on that. What also happened in May, after our May shareholders' meeting and I don't have this up here.
After our May shareholders' meeting, Peter's intentions were to stay on the board for another year. After our May shareholders' meeting, I think Peter took a step back and kind of looked at things and said, "We have a new management team in place. With my personality, with how I fit in this organization, it's probably important for me to step aside. We've got the right folks that are running the company. I have tremendous confidence in these people that are running the company. I need to get out of the way and let everybody just do the things that they want to do," which, looking back, was a great thing for Peter to do, and it showed a lot of trust in all of us that stepped in those new roles. As of May, Peter resigned from the Chairman position.
Our board then went through and decided who would take the role of chairman. And we were happy to report that Bob Wright was unanimously elected as our chairman. That's important. Also, Bob served as an independent director, but Bob's now an independent chairman. That's important to us as an organization. So then changes started to occur in the organization. The first change is that we or I should say, I promoted Phil Coughlin to the position of President of our Global Geographies and Operations. And again, I'll go into detail on why that was important when I show that next slide. Shortly thereafter, I promoted Gene Alger to the position of Senior Vice President of Global Services. Again, I'll explain that as well too. Then we started to see some retirements. And by the way, none of these folks were asked to leave the organization.
I think as they saw the changes that were coming into play, they looked at their own careers. They felt they did very, very well at Expeditors, and they felt that it was time to get out of the way and let the younger generation step in and really start to drive things. Bob Villanueva officially retired as of December 2014. Bob ran the Americas for us. Rommel Saber retired as of March 2015. He ran the Near/Middle East region for us. James Wang retired as of June 2015. Important to note that James remains on our board of directors. James is also an original founder of the company. In June of 2015, we promoted Dan Wall to President of Global Products. In July 2015, Jordan retired as the President and Chief Operating Officer. That sort of takes us to where we are today.
I want to dive into those changes and show you some slides on that. First of all, the geographic changes from a regional perspective. Our previous regions were set up that we had three distinct regions. We had the Americas, we had EMEA, and we had Asia. We changed that, and we went from three regions to five regions. I'll explain why that was important to us. The first change that came into play is, again, that promotion of Phil Coughlin. The reason that was important is the geographic presidents reported directly into Peter as the CEO. I felt that those presidents or whoever took those roles should report into one individual that helped drive us a much higher level of consistency across the globe. Phil took that role on. As Bob retired, he was replaced with Rick Rostan, a long-term veteran of Expeditors.
Prior to this role, Rick was our senior vice president in charge of distribution. Prior to that, he was a regional vice president overseeing the Midwest region for us. We then split our EMEA region into two regions. We split Europe in its own region, and we took the rest of the region, which was Middle East, India, and Africa, and created its own separate region. We felt that was important because the sheer size and scope of that region, we just didn't think it was reasonable that one person could manage that. There was a lot of differences in culture, and just the geographic scope was just a little too much for one person. Tim Barber took that role on overseeing Europe. Tim previously was our president of sales and marketing, and he has since moved over to London, and he's running that region from London.
Important to point out that Tim came to Expeditors. He came from a geographic side. He ran our Seattle branch when he first started Expeditors. So tremendous geographic background. Running the remainder of that region, the major portion, Middle East, India, and Africa, we promoted a gentleman by the name of Murlidhar Krishnamurthy. Murlidhar was a regional vice president for us in India. He did a fantastic job in India. He's now taken over that region, and he's now relocated to Dubai. So we've shifted our headquarters from Beirut to Dubai. We thought that was appropriate. Dubai was more centrally located. More business was controlled out of that market. And then Asia. We split Asia into two regions. And we largely did that as we looked at Asia.
China was becoming so large in Asia, it was beginning to take many of the resources that were otherwise focused in other parts of Asia. We're starting to go more and more towards China. We didn't want to lose sight of Southeast Asia, and we felt that was important to split that into two regions. So Allen Wang took over North Asia. He's based out of Shanghai. Allen was also a Regional Vice President at Expeditors prior to that in that region. But I'll also tell you that Allen's experience, he worked here at corporate in our accounting department at one point in time too. So he has a fantastic background. And then Khoon Ling Lim, she took over South Asia as the Senior Vice President overseeing South Asia. And again, her role prior to that, she was a Regional Vice President in that region.
One important note, as you start seeing these changes, it looks like there's lots of new people coming into the organization. I went and ran some numbers. Our Geo-tenure, just to help you understand these folks, the average tenure of those six people is 22 years at Expeditors. These aren't new people going into these roles. The minimum tenure of any of those folks is 11 years. These are people that have a longstanding relationship with the company, understand our organization very, very well. Those are the geographic changes we made. We then made some additional changes on our corporate organizational structure. Starting on the left side, we've talked about that, that Phil took over all the geographies. Those folks report directly into him. The importance of that is driving consistency through all of our geographies. Dan Wall has now taken over our global products.
Gene Alger has taken over the global services. And then Brad, obviously, with finance. Chris with systems. And Ben with the legal side. The big change there is that pretty much everything other than the Geos used to report through Jordan, and then Jordan reported up through Peter. I felt it was important to sort of flatten that organization chart a little bit and have those folks report directly into me. And that's created an environment where our senior team, in my opinion, is working much closer together. It's much more aligned with the decisions that are made for the organization. So there's some big changes there. I also want to point out tenure on that because you've seen lots of changes on there. The average tenure of those folks that report directly into me is 21 years.
So again, these are not new faces that you're seeing in the Expeditors organization. Well, they are new faces that you're starting to see. They're not new people to Expeditors. They're well established in our organization. And then the last thing I want to touch on is strategy. And that first statement up there, highly focused and aligned on opportunities that will return the company to low, double-digit levels of growth. You can see that focused and aligned is underlined. Why is that underlined? Because you've seen that consistently in our financial press releases. You've seen that consistently in our 8-K responses. Focused and aligned is what this strategy is all about.
It's about picking the right things that are going to move us forward as an organization, and it's about executing those items in an aligned fashion where all of our offices are doing the same things at the same pace, at the same time. So how did we get there? Well, first of all, I'll make it very clear. This strategy is not my strategy. This is a strategy of our entire executive team. And I think it's very important to understand that because creating that strategy to our entire executive team has created an environment where everybody's bought into it. Everybody's focused on the execution of that strategy. So we started by bringing our entire senior team together in a very large room. We listed out all the projects that we were working on as an organization, and there were literally hundreds and hundreds of projects.
We took a step back. We asked ourselves, "Is it reasonable for us to execute on hundreds and hundreds of projects?" And the answer was a very simple, "No. We can't do hundreds and hundreds of things. We need to pare it down to the things that will actually drive the growth for this organization." We went through a significant amount of data. We looked at a mass amount of market data, what was happening in the individual markets in which we compete, what was happening in air freight, what was happening in ocean freight, what was happening from a geographic standpoint. We looked at how our customers were responding to things. We looked at forward-looking things about where the industry might be going, and we created what we believe to be the four strategic initiatives that will drive this company forward.
We did use a third party to help us with this process, but that third party really acted more as a coach and a guide through that process. What the third party did not do is create the strategy. To be very, very clear, it was Expeditors' strategy. We created the strategy. We think we're the experts in logistics, not a third party helping us create a strategy. And that strategy has been communicated to our entire field. You saw released a lot of information about that over the course of last year, how we were communicating that to our district managers, and it was being driven down to the entire organization. It's been accepted. But most importantly, it's been adopted. So it's one thing to hear it. It's another thing for people to actually say, "I get it. I'm on board." And it has been adopted.
So we are very much in the execution of our strategy at this point in time. One other point I want to make is the why. Why did we decide to develop a strategy? I think when our senior team got together and we started talking about how the company had performed over the last couple of years, we weren't happy. None of us felt good with our performance. We knew that we could do better. We knew there were more opportunities, and we challenged ourselves to figure out how we were going to do that. That's largely why that strategy was created, because we knew that we could do better as an organization. So our strategic initiatives. We came up with four strategic initiatives. We've talked about these in the 8-K. I'll provide maybe a little bit more color on them.
So the first thing on there is growth and market share in Europe. Why is that important to us? We believe that when most people think about Expeditors, they tend to think of us in terms of a trans-Pacific organization. We do very well moving goods from Asia to the U.S. We happen to think of ourselves doing a lot more globally than just trans-Pacific. But we are certainly not as large in Europe as we are in Asia, and we are in North America. Will we ever be as large in Europe? I don't know. I'd like to think that we balance that approach. We're certainly striving towards that. We know the European market is a very competitive market. We know we have large competitors that already exist in that market.
But as we went and looked at the data, we believe there are tremendous opportunities for us to grow business in that market. We believe there are opportunities not to grow market share for the sake of growing market share, but to pick up good, profitable business that fits in the Expeditors' model. So our intention is to gain business in that market, but we also think that's important for us to have a stronger presence in Europe because a lot of those European customers control business in other parts of the world. And if we don't have that relationship, it's hard for us to secure business out of other parts of the world. That's why we're focused on Europe. Why are we focused on China? Well, first, I would start by saying that there is a lot of information in the news recently about China. Are they growing?
Are they not growing? What's happening? The stock markets are moving up and down based upon that. We tend to look at it from the perspective of, "It's not really important if China's growing at 7%, 5%, 3%." From our perspective, that doesn't really matter. What matters is China has a huge infrastructure. China does a massive amount of manufacturing. We have a small portion of that market. We still believe that there are very, very large opportunities for Expeditors in that market. Additionally, when we think about the business that we have today, we've largely focused on export business out of China. We think there are tremendous opportunities to focus on import business into China, and we think there are opportunities to focus on business that's controlled by companies other than maybe U.S. companies, European customers, Asian customers. There's tremendous opportunities to grow that business as well too.
I'll also say that regardless of what happens with China, that infrastructure has been built from a manufacturing perspective. That business won't disappear overnight if their economy is not doing well. It will be there for years and years to come. It took many, many years for China to build that infrastructure. It will take many, many years for other countries to build similar infrastructure if they're to begin taking that business away. Continue to leverage and expand our North American market share. We believe that North America is one of the most regulated and one of the most difficult markets to do business in. The U.S. government has a tremendous amount of regulations that are applied to us on a day-to-day basis. We happen to also believe that we are the leader in the North American market, and we think we understand those regulations extremely well.
And we think we can take advantage of that working with companies that are in this market and help provide them with our expertise and provide a very, very high level of compliancy in the services that we provide. And the last one on there is expectation that all offices, at minimum, will grow at the pace of the market. Expeditors has always performed budget processes, but one thing that we've not done until recently is really dug into the data and understand what was happening in each market. We've created this initiative to really focus on how markets are growing and set clear expectations for our branches in each of those markets. So we've created an environment that, at minimum, each office will grow with the pace of the market. We do not want to lose market share in the markets we're in today. Okay?
This is where this starts to get a little tricky. Everybody wants to understand more about the details on the specific things that we're doing as an organization. We think it's important that we keep that information confidential. We think that's largely our playbook on how we're going to execute, and we don't intend to share a lot of that information. But what I can do is I can give you a little color and detail on how we're executing it as a strategy. First of all, every strategic initiative is well-documented. It has clear ownership and has clear measurement criteria. Every strategic initiative, we know who owns it, and we know how it's measured, and we are measuring those things on a regular basis.
We have a strategy program manager at Expeditors that is responsible for following up with our senior executives as well as all the folks in our branches against the projects that we've taken on. Are we executing them timely? Is the information being updated? And then I also want to point out that that information is reviewed on a monthly basis with our senior executive team. So our entire senior executive team gets together on a monthly basis. We do that via conference call, and then every third month, we meet in person. And what we focus on is how we execute against our strategy. We don't get caught up in too many other things that are happening. It's how we execute against our strategy. With that said, the strategy is just a strategy. We're very aware of what's happening in the market.
That strategy will shift over time as the market changes. We can't just pick a strategy and focus on that for five, 10 years. We need to be aware of what's happening in the market as well too, and we are aware of that. Our strategy starts with strategic initiatives. Our strategic initiatives are supported with tactical plans, specific things we're going to do. The tactical plans then have projects tied to them, and the projects have tasks. All this information is captured. It all has measurements and ownership. We believe that's what's starting to really drive the change that you're starting to see in Expeditors, just how we're measuring that. First of all, we believe we've chosen the right things and how we're executing and measuring against all that.
To give you an idea of what some of those things look like, again, I'm not going to go into tremendous detail. So samples of projects, staffing investments in Europe. You saw this in our last financial release where we've increased the staffing in Europe. Some of that comes in the form of additional management that was required in the European market. Some of that comes in the form of additional sales staff we've added to our European offices. There's an example of very specific things we're working on. There are expectations, and that's being measured and controlled with how we implement that. We're in the process of building out additional import infrastructure in China. We don't see that as large capital expenditure. Instead, what we see that is making sure that we have the right folks aligned with what we're doing on building out our imports.
We've very much aligned our global target accounts and our global lane pairs. Again, I've talked about a shipment and how a shipment has an origin and a destination. It also has a shipper and a consignee. We need to be very, very aligned on the sales targets we're going after and the lane pairs that we're focused on. And we've created that, and we have that in place today. And as an example of how we continue to look at incentives and doing the right things, we're in the process of reviewing our sales commission program. Expeditors never wants to be in a world where we're taking money away from people. We don't think that gets the right results. But we have invested heavily in transition implementation. We take new accounts on. We have a very detailed process to make sure that account's taken on properly.
We've invested heavily in account management to make sure those accounts are serviced properly. What we want to do is create an environment where our sales folks are spending maybe a little less time on the maintenance of those accounts and much more time on driving new business to the organization. So we're looking at things, for instance, should we change our incentive and pay a higher commission for new business and maybe a lower commission for the maintenance of that business? Of course, that's a very, very detailed review, a very detailed process, but we think that's the type of thing that we can do going forward. So those are samples. But again, we're not going to get into a tremendous amount of detail. We just don't think that's appropriate to have that out there in the open. So what's not changed at Expeditors? Certainly, our organic growth model.
We're focused on that non-asset-based model. We believe there are enough resources in the world, whether it be commercial lift from the airlines, commercial capacity from the steamship lines, local trucking companies. We're going to take advantage of those world resources to provide our services. We're going to do very limited acquisitions. Seems to be that we're back in this mode again where major acquisitions are occurring. We've never felt that was the right thing for us as an organization. The reason for that is we believe that management starts to get focused on how to combine the acquisition, how to drive efficiencies out of it, and management loses touch with the most important things, which are the employees and the customers. So we're going to focus on taking care of our employees, and we're going to focus on taking care of our customers. We will do small, limited acquisitions.
Traditionally, we've done that in the form of acquiring our agents over time. We made a very, very small acquisition from a technology standpoint about two years ago. Those are the types of things that we will do. I just mentioned we'll continue to focus on our customers and employees. We do measure customer service levels, customer satisfaction. We also measure employee satisfaction. We look at that detail, and we find opportunities to continue to raise that. We won't publish our results, but I will tell you that our employee satisfaction, our results are world-class. We had a third party come in and talk to us, and the third party basically told us, "We're not sure what to tell you. Your numbers are so high off the chart, we can't give you too many suggestions." So we feel really good about that, but it's never good enough.
We think we can do better. We won't change our compensation model. We made changes to the executive compensation, but the bonus pool stays intact. We'll continue to use stock options. That drives long-term thinking of our employees, and it tightly aligns our employees with shareholder return. And most importantly, we're not going to change our culture. We have a very unique culture at Expeditors. It's been built over the years. Our employees adopt it. They feel confident with it. We feel confident with it. Our customers like it. We're going to remain who we are as an organization. So with that said, I'm going to turn over to Brad and let Brad dive into his financials.
Thank you, Jeff. So, Jeff talked about our mission, our strategies, and kind of where we're headed as a company with regard to how important our people are and how our compensation strategies support that process. So let's just take a minute and see how we're doing. Okay? Over the last four quarters, our employees at Expeditors, 15,000 employees, have done an outstanding job. We've had four consecutive quarters that have grown, and that was capped with a record quarter in the second quarter of 2015 where we achieved $552 million of net revenue, $183 million of operating income, and $118 million of earnings, which equated to $0.61 per share. The best quarter in the history of our company. But with that said, like Jeff said, that quarter's behind us now, and we're constantly looking for ways to improve.
But this is very important with how the company is proceeding and some of the initiatives and some of the opportunities that we're developing. Air freight. Jose will come up and talk a little bit about this in a minute. But over the last four quarters, the air group has done an outstanding job. Freight volumes are up. Our margins are up. There was some benefit from the West Coast labor dispute and the slowdown there. We don't know what that benefit was. It's very difficult to analyze and capture all the changes that were going on day to day in that process. But the team performed exceptionally and delivered world-class service during a very challenging time. Okay? And I think that that's going to pay dividends for us in the future when we're out gaining new business as a result of that.
That's where Expeditors really shines, in my opinion. There was also some benefit as it related to kind of in the last quarter related to spot market opportunities for buying as it related to the mix of supply and demand. Jose will talk about that in just a minute. Ocean. Again, absolutely outstanding. We had the West Coast labor disruption that happened there. Our people were put to task, and they performed. We saw consistent growth in volumes and some of the services that we were delivering to our direct customers and to our customers who book on our NVOCC. Dan Wall will talk about this in some detail as well. You can see the big change in the second quarter of 2015, and that was partially driven by some very favorable spot market opportunities that came to us in the ocean market.
That quarter benefited heavily from that, as we talked about in our 10-Q and in our press release. But they did an outstanding job through very difficult times. So I can't thank our people enough about how well they did during that period. Brokerage. Volumes are up from new customers and from existing customers, and our margins are steady. This is what we would expect from this part of our business. And that actually performed very well during a same challenging time. And so they did a consistent, very good job in that regulated environment that Jeff talked about. Efficiencies. This is part of our DNA at Expeditors. Easy to say, but it really, truly is. We are constantly looking at ways to improve our performance. And that's not just on how we perform.
We're looking at how we connect to our customers and EDI so that they perform better and that we perform better. We also look at that from how we connect with our service providers and how they can improve their performance and how we can benefit and help them improve their performance. So it's not truly just our Expeditors measurement. It goes across all of our customers and our service providers. Some of the things that we look at on how we measure efficiency, okay? We look at revenue per person. Okay? That's one pretty high level. But below that is a cascade of different measurements that are going on all the way down to the desk level, whether it's shipments per desk, clearances per desk, all kinds of measurements that help us understand where an office is compared to other offices and what our standards are.
Most importantly, are we continuing to improve that over time? Okay? That's true here at corporate as well. That's not just an operational district, but we also measure our performance here at corporate on how we're doing on the goals that we're setting out to perform as well. So it's part of our DNA across the board. Probably the most comprehensive measure that we have and probably the most important one is our operating income. So operating income as a percentage of net revenue. So it really measures how well do we take a dollar of net revenue and convert that into operating income? Okay? And as you can see from the chart, in the second quarter, we converted about $0.33. That dollar converted to about $0.33, which was a very, very good quarter. Second best in the history of our company, actually.
So we are always looking for those incremental improvements across time. We don't expect that there's any huge operational improvements because this has been part of our culture for so long, but it's something that we consistently drive to. The other part that's related to that Jeff touched on that I want to link back to is compensation. Okay? Because from a CFO perspective, we have a team out there that's analyzing business to determine whether it's good business? Is it the right business? Are we creating net revenue from that business? That's going on constantly. Our systems report that very, very well. And also, are we managing our expenses? Okay? Because you can't have just the net revenue without the expenses well managed. And that drives that comprehensive measurement of operating income as a percentage of net revenue.
We do a very good job at that. The people in the field and corporate watch that very closely. You can see that it's climbing over time. It's not always going to climb. There's going to be some ups and downs. Over the long haul, we like to see that improvement. We get a lot of questions about our cash. We enjoy those comments. We get a lot of questions about our capital allocation strategies. We also enjoy that as well. It's very interesting. We believe we have a long history of demonstrating exactly how we manage this process. I want to take a minute and review how we do this. We have about $1 billion in cash.
People always ask us, "What's the right number for that?" One of the disclosures that we've done over time is we've talked about how much cash is overseas in our foreign subsidiaries. At June 30th, that was $669 million. Okay? We have a tax policy that's very much related to that money. Okay? We have the ability to move that money back to the United States when we need it because we take a full tax accrual. We don't permanently invest, or we don't designate that as permanently invested in any foreign country. So we do a full tax accrual liability on unrepatriated foreign earnings. You can see that on our balance sheet as a deferred tax liability. We regularly bring the money back to the United States in the form of a dividend from the subsidiary to the parent.
That's done on a very regular cadence around the world. So I just want to kind of give you a flavor for that $1 billion and how much we have in our foreign subsidiaries because it helps understand where the money is and how we're managing that process. And it's very much related to our tax policy and how we go about doing that. So our approach. And I think Jeff kind of teed this up well when he talked about things that won't change at Expeditors. We invest in our business first and always. Now, those investments can come in different forms. They can come in the form of additional working capital for new customers at a foreign location, as an example. It can come in the form of technology that we need to buy. It can come in the form of a small acquisition or a technology acquisition.
So there's things that we invest in on our business on a very regular basis and consistently. And sometimes we even have a real estate development in a gateway city where we know we're going to be there for the long term. So we're constantly analyzing these opportunities that come our way and where we want to put those investments. And that's our first job in our capital allocation. The next strategy is our dividend. We've been paying dividends for over 20 years. It's consistently increased over time. And cumulative, year to date or I guess cumulative to date, life to date, it's over $1 billion that we've returned in the form of dividends. So it's a very large number, and we have a very regular cadence on how we do that. And I have a slide that I'll show you in a minute on that.
The last item is repurchasing stock. Okay? And I think everybody's very aware that we've increased our activity in repurchases of stock. And some people have even asked us, "Have we considered borrowing money to repurchase stock?" And I can tell you, we have considered it, and we're not going to do that. This is a conversation at the board level. And we've talked about the pros and cons of introducing that new level of risk to our balance sheet and our business. And we don't think that that risk is something that we want to do at this time. So that's not even on the table at this point. But repurchasing shares is something that we plan to continue to do on a regular basis.
If opportunities in the price present themselves, we will change the pace at what we do that as what we do in terms of the repurchases. Okay? Our dividend history. Okay? Over time and this is a comparison of our dividend per share, the total dollars at the bottom, and basically our dividend payout ratio or earnings compared to the dividend. So we've been hovering around 35%-33%, and we've been regularly increasing our dividend over that period of time. And that's something that's very important to us. Share repurchases. We have two programs that have been approved by the board on share repurchases. One is a nondiscretionary plan. That nondiscretionary plan is if we get proceeds in from our employees, either through the stock option plans or through the ESPP program, we are required to go back and buy shares with those proceeds. Okay?
The other plan is a discretionary plan that the board has authorized us to buy back shares on the open market. We monitor that process by the number of shares that are outstanding on our balance sheet. As of today, our board has authorized us to buy down to 180 million outstanding shares of stock. Currently, outstanding at 6:30 P.M. was about 189.1 million shares. We have basically authorization to buy back nine million, a little over nine million shares at this point in time. Okay? Our total repurchases. We've been doing this for a long time. We've stepped it up, as you can see from this chart. Our total repurchases have totaled about $2.6 billion over the course of the company's history. These are our primary ways of returning capital. This is a program we will continue to follow.
We believe it's pretty straightforward. It is a conversation at the board level. This is the strategy that we've adopted at this point in time. With that, I'd like to have Dan Wall come up and talk about products and services and then about the ocean product.
Good morning. First of all, before I get started, I just wanted to say a quick thank you to Jordan Gates, who has helped me prepare for my next role. I know he's probably listening. Thank you, Jordan. As you can see by this slide, I've been with Expeditors over 28 years. Started off at the ground level, worked my way up through various roles. I think the one thing I like to point out here is I've worked in all three of our matrix organizations, which is product, geography, and service.
You're going to hear me talk a lot about those three groups today because I want to really tell you how we tie in together, how we support each other, and work towards a common goal. So, Jeff mentioned that previously, we were running really these three groups with five people. And now we're running these three groups with three people. So, Phil Coughlin, as he mentioned, runs Geo, Gene Alger on the service side, and then myself on the product side. And the way you can see that is how we're tied in together from products that includes air customs. And I'll talk a little bit more about those different groups. Service side, we're supported in the account management, sales, and marketing, to name a few. And really, it starts with the geography. So, they have a pretty big job.
Before I get into that, Phil, Gene, and myself have worked together for the better part of. I've known them for 28+ years because I think they both have more seniority than I do. We work very well together. We support each other, but we're also highly competitive, and we push and challenge each other in a very good way. I look forward to working with those two. When we talk about geography, this is really where the business happens. They are the front line to our customers. We have a saying that says, "100% employee satisfaction equals 100% customer satisfaction." We believe that. They work very hard, motivating the staff to provide the best service in the industry. This is also where they perform the operational execution and perfect it on a daily basis. They also have P&L responsibility.
So as you can imagine, they're very focused on gaining and retaining business. And then finally, they execute very well against our compliance programs. Next is service. And service is a group that really we rely heavily on from a support standpoint. They bring us a lot of great business intelligence through their sales program and their account management program. They're constantly coming to product with innovative solutions. And they also support our organization with a number of vital services such as health and safety, training, and risk management. So very key to what we do. Then there's my team. And our team is focused on putting together the product strategies that 100% support the strategic initiatives. So this includes how we deal with our carriers and service providers, how we allocate volumes in different trade lanes, and a lot tied to our procurement activities.
We also provide systems development from a business standpoint so that our IS can develop tools and systems that help our employees do their job better and that actually give our customers competitive advantages. We play a big role in the compliance area in terms of awareness and monitoring. And I think it's important that we talk about compliance because we need to keep ourselves and our customers doing business in the right manner. And so I think we help provide oversight and guidance with the field in that area. And I'll talk a lot more about product as I go through the next couple of slides. Okay. So as you know, I have big shoes to fill from Jordan Gates. But I don't have to wear all his shoes. Just have to wear one pair that's tied directly to managing our product leadership.
I'm lucky to have such a great team that's very experienced and very passionate with what they do. If you take Rosanne, she has 20 years with Expeditors. She took on the brokerage product when we were a small broker and has turned it into a large, major global player. She's really a visionary in this product. Jose, which you'll meet in a few minutes, has 31 years with the company. I'm sure when you see him, you'll wonder, "What age he started at?" Jose was a district manager and a regional vice president in our geography. Bill Romberger, who's over our Global Ocean now, Bill grew up in the ocean business. His dad ran a container drayage business in Baltimore. Bill has 21 years at Expeditors but has over 30 years in the industry.
Bill was also in our geography as a district manager and a regional vice president. Blake Bell, who's looking after Global Transcon, has 20 years with Expeditors. Blake was a district manager in two locations and a regional vice president just recently. And then Bruce Krebs, who oversees our Global Distribution , has 15 years this month. So I look forward to presenting Bruce with his 15-year seniority pin in September, which you'll notice we all wear very proudly. And Bruce has over 30 years' industry experience and has been a regional vice president in our company as well. And then Michele has 22 years' experience at Expeditors, mostly on the geography side. And most recently, she was the vice president of Americas' Ocean Product. So I say this because this whole group has been very involved in how the offices and facilities run, how operations run.
We know it quite well. We believe we're very well positioned to help those offices succeed to the next level as well as supporting our service group. I think what's also very exciting is that our whole product group is working on four initiatives. We're working on those four initiatives with our service and our geography group. It makes it very focused and very aligned. Just to explain it, I want to take a second to kind of show you how our products are managed. This gives you an idea. We're set up in a similar way with all of our products. We look at these in two areas. If you look at the left side, these are areas that we really own and need to drive consistency throughout the globe.
On the right side are areas where we really support our geography and service needs based on really what they need or where we can help them. I'd like to also point out that about two years ago, we put together cross-product alignment teams. Essentially, what you have in each one of those boxes is a team that's made up of an individual from each of our global products plus a service representative and a geography representative and then sponsored by one of the product leaders. So we're doing a lot of work where it's a cross-product. It's mode neutral. It's really streamlined a lot of the work we're doing here at corporate. We share resources together. I'm amazed at some of the things we've accomplished in two years.
Knowing what we still have left to accomplish, I'm pretty excited about where these teams are going. Okay. So I won't go into all the products. I'll go into the ones that I think get the most questions: Distribution, Order Management, and Transcon. Distribution, really, we're focused with our customers on helping them through specialized or value-added programs. These are typically programs that turn inventory fairly quickly. So things like return programs, spare parts management, retail fulfillment. We're also very focused on supporting services, which happens to look at network design, facility engineering, and other process design-type functions. Order Management, a lot of people ask, "Okay. What do you really do in Order Management?" We basically manage the customer's order from creation through delivery. So we may not be the carrier. We may not be the forwarder.
But we manage all the steps from the time that order's created. So we're making sure that shipments are consolidated properly, transportation is optimized, and that orders are on time and they're compliant. So we really look at this helps customers reduce transportation costs, helps them improve order-on-time fulfillment, and ultimately, it helps them with visibility challenges. So they get visibility from the entire order lifecycle at the order and item level. Finally, Transcon. We set Transcon up really to first help our international freight. So in the beginning, we realized we had a lot of ground cargo that originated as air and ocean cargo that we weren't optimizing real well. And so Transcon came in and set up the ground network, really helped lower our costs from an air and ocean standpoint.
And then once we had that in place, we took on the next step, which was to go after customers. And we identified customers that we wanted really in the time-definite, white-glove-type service and also tied to cross-border services. Okay. Now, I bet this slide makes you want to join the ocean industry, doesn't it? Beautiful slide. Okay. So just to tell you a little bit about how we approached the market, very similar to the way we're set up from a product standpoint. The left-hand side are really the things, in our viewpoint, we don't control, but we have to know very well. We have to understand. And we have to have great intuition as to where we think those things are going.
On the right side is more of the things that we control to help leverage and react to the things that are happening on the left side of the column. So when we talk about the market, we often talk about supply and demand, how the ocean carriers are doing, what's happening in the market, and then surcharge type of event. And so we'll go into Jose will actually go into quite a bit more detail on this as it relates to air. So I won't spend too much time here. Before I talk about the market, I quickly wanted to update you on how we approach the NVOCC and freight forwarding side of things. I think it's important because it'll help you understand how we look at certain market dynamics. So from an approach standpoint, we want to be the preferred customer to our carriers, bottom line. Okay.
So we know the market that we go after. We know small and medium-sized customers need door-to-door integrated services. They need an NVO who can give them multiple sailing options, flexible sailing options. Typically, large customers sign direct contracts with the carriers. So on those accounts, we really focus on the niche trade lanes or maybe the trade lanes where there's a lot of volatility. We'll help them, but we'll be probably a smaller part of their strategy. We want to be low-cost. We do this through EDI and through account management setups with the carriers. We want no carrier to represent more than 10% of our volume. So that gives us a very wide footprint, gives us a lot of capacity, and gives us a lot of flexibility.
And then we want to be aligned at the local, regional, and global level, so very transparent in our relationships with our service provider. And we think that's very key. And then we actually have a pretty thorough forecast and allocation process that starts at the district office level, works its way up through corporate, and is really the foundation of what we use to go negotiate our global contract. On the freight forwarding side, these are large-volume customers that typically have their own contracts. So they want us sort of facilitating the process. They want us to arrange the booking. They want us to make sure the container gets delivered, put on the vessel, and really manage those key milestones for them. They also want us to do oversight on carrier performance and the allocation management. We do this in a highly integrated way.
So we have to be very connected from an EDI standpoint. And then we also act as kind of a business continuity for these large customers where if something takes place with a carrier or a particular trade lane, then we're right there to help them from an NVOCC perspective. And quite frankly, we'd like to move all the people on the freight forwarding side over to the NVOCC side. We work very hard on that. Okay. So let's get into the market info. So this is a slide that Seabury provided. And I think they do a great job on the demand side of the charts here. The width of the arrow indicates the size of the trade lane. So you can see that Intra-Asia is the largest trade lane, largest containerized trade lane. And it's growing at 2%. So relatively flat. So it's shown as yellow.
And then you take the next largest, which is Asia to North America, growing at 7%. That's kind of the shining star. Then you get to the next trade lane, which is Asia to Europe. And you see that that's down 2%. And then North America to Asia's down 9%. And then there's some pockets of other global trades which are doing well, which is great for us. We're a global player. So obviously, all those green arrows, we need to take advantage of. But overall, we're looking at 1.6% January to May in containerized trade. It's relatively flat. If you look at the supply side, we use companies like Drewry to help us with this. I think they do a great job on showing supply. They have it somewhere in the 7%-8% range.
If supply's up 7%-8%, demand's up even if it hits between 2% and 4%, we still have an issue with an oversupplied market. That tends to benefit us in some cases because in an oversupplied market, there is lots of volatility. When there's lots of volatility, we have options to help our customers do that. That can be in the form of carriers laying up ships because they have just too much capacity. When they take ships out of certain trade lanes, customers get impacted. We can go in with a wide footprint and help them through that. Same with carrier reliability. While the trend is up, it certainly has not been anything to write home about for the last couple of years. Quite frankly, it hit all-time lows earlier this year. It is on a trend up.
We hope that that continues. But I show this one because also when there are carrier performance issues, we have a chance to look at our footprint and figure out a way to help our customers, hopefully, provide a less impact on this supply chain disruption. We think, obviously, it's a tough environment for everybody dealing with this. But the more options you have, the better, the more flexibility we can provide. Carrier financials, they are getting better. They had a pretty decent first quarter. Second quarter is dropping, but it's still positive. And these were reported by Alphaliner, which I think does again, they probably do the best job on the carrier financial side of things. And this is a good side. The carriers have been struggling for a while. And we really need the carriers healthy because with health comes stability.
With stability, people can predict their pricing a little bit better. But it just hasn't been the case. Regardless of whether they're doing well financially, they're still buying up a lot of capacity because they want the bigger, more efficient ship. And that just continues to impact. It's kind of a cycle we haven't figured out how to get out of. But even in this case where we see carrier financials, we pay very close attention to this because the way we work with our carriers is really where can we help them, and where can we ask for their help? And we really try to match up that volume to benefit each other in a way that a large NVO can benefit these carriers.
And I think you're starting to see carriers that used to look at NVOs in certain markets as a necessary evil starting to look at us as a very strategic opportunity. And so I think you're going to continue to see that where we can really help them through the times when volumes are down. We've got that cargo that we can commit to on an annual basis and help them through it. On the regulatory side below, you see China Shipping and COSCO. So there's been discussions about the potential merger of these two steamship lines. And I bring that up. It hasn't happened. But apparently, their trading has been suspended. They're in talks, or they're behind closed doors. But if that happens, it also brings up another challenge in our industry, which is when two companies merge, and they're both in different alliances. We're down to four alliances.
You can't be in two alliances. So if they were to merge, they have to figure out which one they're going to. They have to figure out which one's going to get impacted. And then the alliance that gets impacted has to figure out how they're absorbing that service. And the customers that are moving on those two carriers immediately start to want to figure out, "How are they going to move cargo in the future?" And I think we have an opportunity to really come in and help them in that area as well. The other thing we get a lot of questions about is the Panama Canal. People want to know, "Hey, is this a game changer?" And I don't have the answer to that. I can tell you I certainly think it will continue to play a very important role from Asia to East Coast.
I'll kind of show you why I think that. Whether it'll be a game changer or not, you have to be seen. The project's been in place for eight years now. It's scheduled to be completed in 2016 in the spring. We've seen it delayed a few times. Right now, that's the date. Ultimately, it will allow them to carry vessels that are twice the size of what they can put through there today. That should benefit the Panama Canal in a tremendous way. Look at what's happened over the past few years. Really, the balance has changed quite a bit. The capacity is about even. I think the average-sized ship goes to the Suez Canal. They have the advantage there. Look at what these canals can handle.
After the Panama Canal opens, they will be able to handle up to 13,000 TEU ships. The Suez can handle 19,000 TEU ships. If you look at the chart on the right, it would show you that the carriers have done a great job putting more services through the Suez. Now, it really kind of boils down to transit time and price. Right? That gap has shortened. We'll talk about that in a second. But this just shows you a chart that in December, there were a number of new services implemented to the Suez or a new string implemented to the Suez. Well, that really allowed them to take advantage of the market, and they gained market share. Now, it's back into better balance. But it's still 51/49. They had a high of 74% at one point. It's been dropping since 2010.
So transit times, what's the best option? The best option is still via the West Coast. That's getting better as the congestion clears up. Right? There was an issue with West Coast congestion, which drove people to start transferring their freight to both the Suez and all-water East Coast routings via the Panama Canal. The transit times, if you look at Shanghai to New York, are pretty much the same. Not a huge advantage there. The one that wins out is the one that has probably the lower price. You'll have to figure out which one you think that will be. But they will all three, I think, be viable options for the import community in the U.S.. We are starting to see freight move back to the West Coast as things improve.
I don't think it's all come back as some people will continue with their contingency balance. But some has definitely come back. Okay. Thank you for your time. I'd like to turn it over to Jose. And thank you.
Good morning, everyone. Thank you for attending. I'm Jose Ubeda once again, Senior Vice President of our Air Cargo Group. Similar to the others within the organization in terms of career path, I started back in 1984 in San Francisco. Similar to Danny, I was in geo. I also was in sales and then now on the product side for the past seven years. One of the things I think is important to note, and you've seen a common thread as Jeff, Brad, and Danny have spoken, is that we have a strong sense of obligation to one another. But more importantly, as we're moving forward, we feel this strong sense of accountability in executing our strategy.
It's us that we're so aligned on the things that we're doing as we go forward, whether you're in product, Geo, and service. It's really easy to execute the things we're trying to accomplish. One of the things that I think is important to note from the air side is we use the world's assets. We use what's available in the marketplace. And one of the things that we want to make sure that we do is we optimize our consolidated cargo as best as we can. We want to make sure that we're going after the right business with the right margins that fit our model. We want to make sure we're executing at a high level and delivering the best customer service. And with that is similar to what Danny had talked about.
Over on the things that we don't control, we start looking at demand and supply, or that's also air economics or market economics or surcharges. Those are conversations we want to have with our service providers. The more information we know, the better we are in terms of being flexible and nimble in the marketplace. Things that really matter to us is we don't want to be late. What we mean by that is that the more we know, the more we can then drive solutions to our customers by, again, utilizing those world assets. When you look at the service provider management, that really deals with how we have a relationship with our commercial partners.
We value those partners in terms of what they're doing in the marketplace, how they're moving capital equipment around, what new routes or solutions they have, and how they fit into how we manage our capacity. When you look at the customer and district requirements, that's for us to know where markets are shifting but what our customers are looking for in terms of need, in terms of where their product's moving, things of that nature, and what our districts are seeing from a forecast standpoint. Tie those things together. That helps us manage our capacity through our gateway program. One of the things I want to touch on is on market events. Market events for us are things that are either controlled or uncontrolled.
A control event could be something similar to a product launch in the marketplace, things that are forecasted that our customers are calling us about. How do we prepare for that? But uncontrolled events that may disrupt how we move cargo could be a port strike, for example. Or it could be something that's happening in a political environment. Or it could be something that happens similar to the automotive sector with the airbags. How does that change demand? How does that change supply? And how do we react to that so we're not late so we can continue to move cargo in an efficient manner? So one of the things I want to touch on is how we use information. To us, there's so much available data, market information, conversations we have in order to make the right decisions to keep our cargo moving.
As you know, in the air market or any of these markets, it's very volatile. It changes on an ongoing basis. Right? So we look at what are the carriers doing from a capacity standpoint? What is supply and demand telling us in terms of how carriers are moving their metal around? What does fuel really mean in surcharges? And how does that impact us in terms of decisions? And then what are the market trends that we're seeing? Because at the end of the day, what we're trying to do is create equitable balance between our carrier partners that we value, our customers, and Expeditors. We want to make sure that we balance that out so it all works well in moving cargo. So today, we have an evolving market.
Two to three years ago, we were talking about where you saw a shrinkage of size of product, things were getting smaller. We're starting to see a little bit of a change where things are starting to get a little bit bigger, right, in the high-tech world especially. So could that be better for the airline? Too soon to tell, but we're starting to see that shift from things that were really small just increasing in size. We're seeing mode shifts. Customers are getting much better at managing their inventory, moving more towards ocean. But there's always going to be a need for air. When we talk about mode shift, we look at multi-mode. We work very closely with the other products. And how can we offer a combined solution moving air and ocean together? You have the Internet influence.
It's adjusting in how people move product, whether it's direct-to-door, the customers or a residential area, or it's bulk moves, things of that nature. How does that impact the market? We study that. Then you have the jet fuel volatility, which I'll touch on in a minute. You have things that happen all the time in the world events that we have to look at. How does that change the dynamics of the market? Then we're in a volatile industry when it comes to air. You have a lot of investments being made. You have a lot of new capacity coming in. You have to learn to adjust and use that information to drive our solutions. As we all know, the airlines run a very highly capital-intensive business. They have historic low margins. They have this thing called purchasing of fuel.
We study that. Again, I'll get into a little bit more about the conversations we have with the airlines in terms of how that impacts their return on invested capital. But when we look at markets and what's happening with the air industry today, in some markets, we're seeing pricing at low levels in select carriers. And what do we learn from that? How do we use that information? So, I want to these charts here are provided by IATA, who provide industry information around the world that's happened in certain events. What we're seeing today from a global perspective is there's been a moderate growth in terms of air freight. But when you look at the top chart, the red line represents the available capacity in the marketplace. And the dotted line represents demand. So this is a global perspective.
If you look at it from a holistic standpoint, what we look at is that what does it look like on a lane-pair basis? What does demand and capacity look like in certain markets? Because you may have an area such as Southeast Asia, for example, that has a high demand but not enough supply. So, these charts don't tell the entire story. But how we use it to our advantage is what are the carriers doing? Are there opportunities out there in terms of additional payload so we can drive our costs down, maybe offer different solutions to our customers? The chart below shows what's happening specifically in Asia through the month of June. I want to bring something to your attention that I think is interesting in terms of what's been happening in the marketplace with how airlines manage their metal.
You look at supply and demand have both gone down in Asia completely. That doesn't mean the market's down, but overall. Okay? And what the airlines are doing, they're getting much better at removing capacity when necessary. So as the market changes, they change. Maybe they'll park a plane for a few days. Maybe they'll just adjust and put that plane somewhere else. But what we also look at, again, is where is our opportunity where there's additional payload or capacity for us to offer different solutions in the marketplace to stay ahead of the game? Now, we've all seen this trend over the past year. What this chart represents since December 2003 is that we've seen that pink line or that red line where that's freighter capacity being removed out of the marketplace. So you see less freighters flying, and you see more passenger planes increasing.
Two-engine aircraft are really the industry's choice. They're more fuel-efficient. It's the direction of the industry. Airlines are getting better at managing their metal. It's effective at how they use it. And you think about it from a freight-forwarder standpoint, carriers who have passenger loads, they manage on-time performance. Use those airlines that are moving their product we can use those airlines that move product on an on-time basis. But you think about the belly capacity within some of these wide bodies. It's up to 20 tons. You could have an airline who's moving who used to have a freighter, for example, moving a particular route, let's just say Hong Kong to Frankfurt at one time. And they were moving a freighter, and they said, "You know what? We're going to pull that freighter out because we're seeing passenger traffic increase.
Let's do 3 or 4 wide bodies on that same route," which equals an equivalent of a freighter. So we're seeing this shift from capacity in terms of belly. And we're just looking to utilize it in a way that's effective for our customers. But we see this as more of a trend. The thing that we look at is we look at, again, we study payloads. Are the airlines sitting in the where's their additional payload or opportunities or new routes to move cargo? So again, we use this data to really understand how it can help and benefit our customers. And again, this is just a chart that provides you a clear indication of growth of belly capacity versus freighter capacity.
And when I look at this chart and the previous one, the things I think about is what's being retired in terms of aircraft, right, and what's being replaced, what's being added, who's adding capacity to the marketplace in whatever sector or whatever region in the world, and how do we utilize that? But we want to make sure we understand this by having comprehensive conversations with our service providers. So the topic of surcharges has been one of great importance over the past six-seven months here. And what I want to point out here is that we look at this from a standpoint of if the airline's operating costs are going down, the conversations we have with them is we want to make sure we understand what are we doing in terms of adding new planes? Where are new routes that are being added?
Are you looking at new technologies being more efficient, things of that nature? But what we're seeing in the marketplace is that we have about 12 airlines to date approximately that have gone into what they call all-in models. If you think about this, it's not all airlines. We use about, say, 30 airlines today to move about 80% of our total tonnage. So out of the 30 that are out there, there's probably only 12 so far that have made this switch. When we look to have this conversation, it's all about all-in pricing. It isn't just about surcharges. It's about what their operating cost is, what the price is in the marketplace, can we offer competitive price to our customers?
The last chart down below just shows a little bit more about, with fuel dropping, the return on capital investment for the airline. But so we're having these conversations with the airlines today to make sure we understand impact where there's opportunity. So for us, using information and data, once again, is we need to study demand and supply to understand so we can be ahead of the game and not be late. And it all really entails trying to keep this a balance in the marketplace and really understand how does that benefit our customers, where there are opportunities for us, and how do we look for business that really meets our model? So now I'm going to turn over to Chris McClincy.
Good morning. My name is Chris McClincy, and I currently serve as the CIO here at Expeditors. A little background about myself.
I've been with the company for 17 years. I actually started off doing email support and implementation. Over the years, I've had a variety of different roles, all in our Information Services department with our technology teams, technology roles, management, and leadership positions. I've currently served in this capacity for the past year and a half. My objective this morning is to give you some insights on why Information Services is a strategic differentiator for Expeditors. Now, you might be asking yourself, "What is Information Services ?" Well, hopefully, you're asking yourself what that is. Information Services is systems, technology, and data. More specifically, it's around our practice of building systems, our line of business applications. I'll go into a little bit of detail around that.
It's around technology in general and the introduction and the innovation around all the technology that we use in our business today. And then data. And you've heard us talk a lot about data today. It's around the integration, the innovation, and utilization of data in our organization. So very simply stated, Information Services is systems, technology, and data. When I thought about how I wanted to frame this conversation with you this morning, I thought I would build three steps. I thought we would talk about our philosophy. So hopefully, that gives you some background on where we've been from an Information Services perspective and kind of our current thinking on our approach to Information Service s. Then I want to actually talk about our approach because then that'll give you some fidelity, some view into our actual activities and how we go about the practice of Information Services .
Then we'll talk about our future direction so you can see where we're going as it relates to technology, system, and data. How's that sound? Sound good? All right. Let's start with our philosophy. Our philosophy begins with people. It's a huge privilege for me to be able to spend 15, 20 minutes with you this morning and really represent the work that our people do. Our people are the most important aspect of our company, of our culture. It's especially true in Information Services just like it is in every other part of our organization today. So we have an intense focus on retention and development with our Information Services professionals. Why is that important to us? Because retention and tenure are key, right? I mean, every information service organization has great processes, great methodologies, great documentation. But with tenure comes great wisdom, experience, and capability.
I'm proud to say the tenure in our Information Services group is quite strong. Our retention is very healthy. What that does is that really creates an environment where our team members are invested in the long-term sustainability of the decisions they're making. When we're working on developing technology solutions or we're deploying new capabilities to our employees or to our customers, they know they're going to be here for the next 10 or 20 years of their life to really see that solution through. Retention and development play a key role in making sure that we have the best technology organization in the industry. I'm proud to say I believe strongly that we do. It's a privilege to support such an exceptional team.
And I'll tell you, I've yet to come across in my 17 years here, and I've worked with the technology teams that entire time, a problem that we haven't been able to solve or an idea that we've been able to successfully take through to innovation and a new capability in our systems. We constantly meet and exceed expectations in that respect. And from a story perspective, you saw in some of our earlier charts that Jeff shared that 16% of the customers that we serve are computer customers. And so we get the chance to roll up our sleeves and work with a lot of those customers. And these are really leading-edge technology companies or brands or names that you would recognize in different verticals, if you will.
And I'm proud to say in many of those experiences, we bring a lot of enlightenment, and we bring a lot of innovation to the work that we do with those technology firms. Again, just kind of a nice validation that we have an amazing team. Recruiting also plays a really key role. So we're growing. Our company's growing. And as our organization grows, our Information Services capacity is going to need to grow with it. So we pay a lot of attention to recruiting. It's important that we get top-level logistics-focused technology professionals in our organization. And again, similarly, as Jeff shared earlier, you'll see we get people that come into our organization, and our culture is very unique. And they get a feel for whether the culture is right for them. And if it is, they tend to spend really their entire careers here.
And if not, they typically move on, which, again, we think is a good model. But again, from a philosophical perspective, our people have always been our focus and will continue to do so. We also see a lot of transition with our people, healthy transition. And it's part of the development of having long-term career paths for our technologists and really everyone in our organization. And what I mean by that is you'll see people in our Information Services group transition across domains and functional areas within Information Services so they can try different domains. They can try different practices, different roles in Information Services . We also see a healthy amount of movement from Information Services into our product groups and our service groups and our geography groups as well. So that brings a lot of good, healthy knowledge transition across all of the functional areas in our company.
Again, it's one of the things that really ties into the amount of tenure we have in our company: our employees constantly get to challenge themselves, do new things, and try new jobs. The second area of our philosophy that's been true for a very long time is that we research, we develop, and we maintain our core systems internally. What does that mean? That means that when you look at our line of business applications and we'll talk a little bit about those over the next couple of minutes, we write and develop those systems ourselves with our own team members. We're not utilizing an SAP system or a big-box ERP platform. We don't utilize a transportation management system from a third party.
All of the core line of business applications that manage our day-to-day global operations are systems that are written by Expeditors International team members. And we think that's a big differentiator for us. We've done that for 20+ years. It's been fantastic for us. And I'll talk about some of that during our approach on why. But it's been a key differentiator. The third thing I would like to mention is the fact that we're consistently taking advantage of leading-edge technology. And that's important for a couple of different reasons. And I'm going to highlight two. One is, as I spoke about, that we build our own systems internally. We take advantage of the technology that the world produces to do so.
What's important to us is, as the world continues to produce greater technology components, that we're leveraging and incorporating those components into the systems that we're building. In companies like IBM, Oracle, or Microsoft, they develop new frameworks, new components, new APIs. As we build new systems, we're incorporating those new technologies into the systems that we build. That gives us best-in-class capabilities in the technology we use to build our systems. That also creates career and job satisfaction for our teams that have to work with technology. I mean, if you know technologists, they're constantly motivated to continue to work with the latest and greatest technology that's out there. By incorporating that technology into our work of creating systems, it gives us a lot of benefit.
The second thing that's really important about using leading-edge technology is in all the technology that surrounds our line of business applications. Each of you work with a laptop. Each of you have Windows or Apple. Each of you have email tools and Word. It's been our practice and part of our philosophy for years to make sure we're using leading and current technologies. For a couple of different reasons. One is companies like Microsoft, again, Oracle, and IBM, they're spending millions and billions of dollars in research and development to bring great capabilities to the work environment, the digital work environment that we use every day. That brings great productivity benefits. That creates great efficiency. For us organizationally, it's consistent globally. So it doesn't matter whether you're in Dakar or whether you're in London.
You're using the same version of Windows, which is typically the latest version of Windows. You're using the same level, same versions of Office. That also improves our security position. As you know, in all of our organizations and the digital workplace, security is becoming more and more of a concern. We have to keep up our vigilance in protecting and maintaining our environments. By staying on leading technology, that ensures that the software we're using is up to date with all of the security work that a lot of the vendors and service providers that we work with incorporate into the new products that they're using. Then lastly, what I'll mention is just around collaboration. We're a very connected organization. We live in a very connected world. We've had a philosophy of always investing in leading unified communications and collaboration platforms.
If you look at our business model, there's very little that happens in our company without two offices working together. So having leading-edge unified communications and collaborations tools has allowed us to be able to communicate very regularly. It's facilitated the ability to have a face-to-face or a team meeting whether you're sitting across a desk from somebody or you're spreading across multiple continents. That's been a key part of our philosophy. Then I'll also mention just data quality. We realized a long time ago that data is the currency that feeds our systems. And it gives a huge competitive advantage for us. We've had a very consistent focus on the quality of our data, the availability of our data, the performance of our data, and accessibility.
And when you see some of the reports that Brad shared and Jose and Dan, hopefully, you're getting a feel for just how integrated data is in our day-to-day operations. And we've had a focus on that historically. And that's an area where you'll see also in our approach and our direction as well. So hopefully, that gives you just a little backdrop in terms of what has our philosophy been. Again, our people are at the nexus of everything we do. We've built our own systems. We've done that for a long time. We utilize leading-edge technologies to do that. Having a safe and focused practice on data quality is equally important as well. Okay? Everybody comfortable with that? Yeah? Okay. So let's shift into our approach.
So in terms of our approach, I want to start with, we have a global cross-functional executive steering group that really is responsible for the direction and the strategy of our global Information Services program. Again, that's systems, technology, and data. That group has existed for many, many years. The participants in that group actually include our CEO, our CFO, myself, our product and service leaders, as well as senior executives from across all of our geographies. So what that does is that gives us a very good level of strong cross-functional global representation to really drive the funding, the investments, and the strategic priorities of our Information Services program.
That group is very involved in making sure that we're aligned with the company strategy that we've talked about and that while we're investing our innovation and our time and our resources is aligned with that company strategy, that group is responsible for holding our Information Services group accountable for delivering good results for our employees and for our customers. That group also maintains responsibility for ensuring the work we're doing is relevant, not only for today, but we're working on things that are very forward-thinking as well. So again, just at a very high level, our strategic direction is really owned by an Executive Information Services Steering Committee . Now, the second thing I want to mention that's unique and differentiates us in our approach is the fact that we use one globally consistent strategy and platform. This is a big differentiator.
If you go back to our philosophy and you think about the fact that we write our own system so two key takeaways here are is that we write our own systems ourselves, and we use one system globally. So in practice, what does that mean? Take our transportation management system. That transportation management system has been developed by Expeditors employees. That transportation management system is the same system and the same software everywhere in the world. So if I'm an agent and I'm doing shipment processing for transportation operations, I'm using the same system in London as I am in Los Angeles as I would be in Hong Kong. And the benefit of that is tremendous. You see that in our operating efficiency. We receive great benefit from that.
It brings us great global consistency because the same level of service, the same level of information that we provide in one geography, we can provide in the other. That brings great consistency in our staff member globally because, as they transition between offices or geographies, they're still working with the same system. From a development perspective, that gives us great competitive and strategic advantage. So if we're going to introduce a new capability for a customer or for one of our offices or because a customs regime is making changes in one country, we make that change once. And then the entire network, our global operations benefits from that changes, figuratively at the press of a button. We've also felt it's important to have one global system and to write that system ourselves because it gives us control.
It allows us to decide when we're going to introduce new capabilities, how those capabilities are going to work in our organization. And we have total control over that. So we're not necessarily negotiating with a third party for them to update their software or waiting for their next release. We really control and dictate when we're going to introduce new capabilities through our systems, technology, and data. And that's been a big key differentiator for us. A couple of other aspects that I want to mention about our approach is we take a very integrated approach to the development of our systems today. Nobody does anything alone in our organization. And so you have this really tight-knit relationship between our product groups, our services groups. So these are team members in Dan's organization and Jose as well as our other product groups. Services comes into play.
Our geographies as well. They work hand in hand with our technologists to really do the systems development, to decide what technologies we're going to use, and to help with the deployment of those capabilities across our organization. It's a very blended mix. What that does is it helps us get it right the first time. We're not constantly guessing, right, "This is the right capability." We're getting direct, good feedback from our employees who interface with our customers to help us understand, "Where are the right capabilities that we need to bring to our market as quickly as possible?" The other thing I want to mention is we use a very agile and iterative approach. That's important because we work in an environment that's constantly evolving.
By being very quick on our feet, by going through what we call our sprints and cycles around developing new capabilities to our environment, we can bring new capabilities and new features to our employees, to a customer, to our service providers in a very quick fashion. So again, going back to that philosophy of we're going to design and write our own line of business applications ourselves, we're going to do so in a very integrated fashion with our product groups, our service groups, and our geographies. Then we're going to do that development in an iterative way. It allows us to be very flexible on what seems to be the never-ending change of demands that we see in our business today. A couple of things I want to highlight. Data infrastructure. We work in a very integrated environment from a data perspective.
We have a very large data team, our EDI team. They work relentlessly and tirelessly to ensure that we're well integrated. First, with our customers. We exchange a tremendous amount of information with our customers. We're highly integrated with them. That brings a lot of benefit to our customers and to Expeditors. What I mean by that is by sending a lot of information and data to our customers about their supply chain activities, that makes them more productive. That makes them much more efficient. That also allows us to have a tremendous amount of information from our customers. That makes us more productive and efficient. We're also finding consistent ways to capitalize and innovate and take advantage of that data. We also integrate with our service providers. As Dan mentioned, we want to be a great customer to our service providers.
They play a really key role in our success as an organization. So we're constantly striving to integrate with our service providers so that we can work electronically with them, so we can reduce the need to do manual data entry, so that we can get better optics into the processing around what's happening with our freight, what's happening with our customers' goods. So we do a lot of integration in a lot of different ways with our service providers. And then we also integrate with customs regimes and regulatory compliance agencies globally because we're in the business of moving international goods. And the more that we can handle the facilitation of documentation or information electronically so you're getting rid of paper out of your system and you're utilizing information across systems, and again, the more efficient that makes us as an organization.
And again, having a highly integrated data environment is something that we've been doing for a long time. We just see that increase growing as data becomes an increasingly important role in all of our organizations and something that we're going to remain committed to. And again, that's a practice that we take advantage and do ourselves. Again, we have our own team, and they focus on doing that EDI work and that data work on a day-to-day basis. Now I'm going to switch gears and talk about direction. So as I hope you would expect at this point, our direction starts with a relentless focus on our people. Our people are the most important aspect of our company and our culture. And unless you get people right, everything else is either a lot harder or impossible, in my opinion.
So you can never take your eye off making sure that you've got an amazing work environment where everybody can come in and have opportunities for growth, to be able to grow in their career and to have a long-term, meaningful career. Our team today has amazing and tremendous impact on our company's success. Our IS group globally plays a key role in enabling and empowering everything we do today. Our technology-driven positions are equally as important as our management and leadership positions outside of the technology industry. So we can never take our eye off that. We have to make sure that we continue to have the best and the brightest in our industry. So that's going to continue to play a key role in our future. We need to make sure that we've got constant innovation. I'll tell you, we've got 15,000 employees in our company.
Every day, they come in with new ideas. Those ideas are gems. There's gold in that. Our product and service teams understand really well where their products are going, what the industry demands from the services they're trying to offer. They have amazing ideas. Our customers have great ideas. Our service providers have great ideas. The fact that we control and we manage our Information Services approach and strategy ourselves allows us to incubate, to pull in all of those great ideas, and to turn those into new capabilities and new features in the technology, data, and systems that we're using to drive our organization. So that's just a constant environment that we have to continue to foster. I'll tell you, that innovation has been an exciting part of the 17 years that I've been here.
Again, I've never seen a problem that we haven't been able to solve or an idea that we haven't been able to take from incubation to innovation to actually features and capabilities for our employees or for our customers. So it'll continue to play a really important role in fostering that environment, encouraging that environment, and then, of course, delivering on those expectations as well. We need to continue to leverage data to improve decision-making. And again, I can't emphasize enough how important a role data plays in our organization. And what I mean around this is there's data in terms of how we integrate data and how we share data with other organizations, which I've already spoken about. I think the quality of our data, we spend a tremendous amount of time ensuring the quality of the data that we have.
And then how do we capitalize and utilize that data and that information, both in terms of reporting, business intelligence, advanced analytics, and other associated activities? But the need for us to continue to get better and better fidelity through the amount of information that we get and, not to tell you, the amount of information we have in our organization is phenomenal. It plays a key role not only in the innovation you've seen. So as you look at if you just to pull back a little bit to Brad's chart where he was showing about our operating efficiency, I can't express enough how much of that's by data-driven work. Each one of our branches, our regions, from a product and service perspective, they have amazing access to data to be able to drive continuous improvements in their operations. And that almost seems to be unlimited.
It seems like every month or every quarter, you would expect that to flatten out at some point. But we continue to find new and innovative ways to improve our operations. But it also helps us by empowering our service providers so that they know how they're performing, how well they're doing from our perspective as one of their customers. And then lastly, I'll just mention it's a huge competitive and strategic advantage for our customers. Again, we can lighten up our customers' supply chains in ways that are very unique to them. And depending upon where they're at in the maturation of managing and developing their supply chain, we've seen some of our customers working hand in hand with us and utilizing that information and our capabilities to totally transform their supply chain, which is a very exciting place to work.
And again, I think more and more organizations are going to take advantage of that. So data remains key. We've been doing some research and development around the Internet of Things or IoT. If you're not familiar with that concept, I would highly encourage you to do some research after the meeting on that. But that's an area where we see great potential for our company and for our industry. And so we've got some pretty exciting and innovative work happening around the Internet of Things. That's an area where we want to be leading, and we don't necessarily want to follow. And so it's something we're keeping our eye on and we're staying engaged with. And then last, I just want to highlight, we need to make sure we keep an intense focus on security, security around our systems, security around our technology, and security around our data.
I think, as we all know, it's becoming ever increasingly important that we maintain a very safe digital work environment and that we're taking great care of our company assets, our customers' information, and the work environment that all of our employees work in and that our stakeholders depend on. For me, it's very exciting to see this continue to escalate in terms of its importance. I actually have a security background as a practitioner in information security in one of my roles at Expeditors. So it's great to see what I would say from a global perspective, this become more important and getting more attention. It's an area, I think, that we've done really well in. It's an area that the company has always understood has been very important given our compliance background. It's an area that we're going to continue to invest in.
So hopefully, that gives you, again, just some insights into why Information Services is a competitive and strategic advantage for Expeditors. Hopefully, that gives you a little background on our philosophy, gives you an idea on where we've been and kind of our thinking around Information Services , gives you a little bit of visibility into our approach, how we structure ourselves and our activities towards the practice of Information Services , and the fact that we do do a lot of our own development. We have control over our own destiny, and we think we understand our business better than anybody else. And then it gives you a little bit of perspective and some insights into our direction and where we're going to be focused over the next couple of years. And so hopefully, that helps. So I think with that, turn it back over to Jeff.
I'd like to invite Brad, Dan, Jose, and Chris to come on up. We'll start into a Q&A session. Before we jump into that, though, I know there's a lot of questions that we've thrown out this number that we believe we can get the company back to low double-digit growth. People want more data around how you're going to do that. Hopefully, today, we're going to give you a little information on the strategic initiatives that we put in place. Those are grounded in solid detail. We've studied a significant amount of data understanding that. Hopefully, we've given you good insight to the type of people that we have working at Expeditors who are going to execute against those strategic initiatives. Then the last part, when we look at the market, we look at the markets in which we compete.
We fully understand the global trade is not growing at the pace that it once was. We understand the global economy is not growing at the pace that it once was. But we look at our market share. And in most markets we compete, we handle less than 5% of the overall market share. We see tremendous opportunities to go out there and obtain business that fits in the Expeditors model. And we think we've been doing a pretty good job of that over the past year or so. So that is our focus, and that will remain our focus. With regards to questions, since we're webcasting this, we're going to have Noel go around with a microphone because we want the questions to be heard on the webcast. I'd ask that you direct the questions to Brad or myself, and then we'll redirect as appropriate.
I think Brad and I have a little better understanding of public and nonpublic information. We want to make sure that we keep ourselves out of trouble on there. Fair enough? Okay. So Noel, I'll give this to you.
Well, thanks, everyone. This is Brandon Oglenski from Barclays. Appreciate the annual meeting and getting to know the company a lot better here. But Jeff, can you just hit on that? Trade is slowing. We're not seeing the type of growth that we saw for 20 or 30 years. We've definitely had a lot of disruptions in the past year from the West Coast, from currency movement. So in this environment, how defensible are those differentiating factors of Expeditors? But is this easy for someone to replicate where before gaining that market share might have been a very visible line of sight? But now, is it easier for someone to come up and develop the systems on a faster scale and create what you guys have done over the last 30 years?
Yeah. So my comments to that would be that, first of all, if we look at global trade and what we looked at, what's happened, we've gone through a period of about four years. Well, actually, it's longer than that. We had the economic crisis that took place, and then everything sort of flattened out. When things flatten out, it's difficult for us to drive the results that we want to drive. We do very well when things are going up, and we do very well when things are going down. That creates opportunities for us to take advantage of things that are occurring in the market. With regards to the future and where the industry goes, we think it's incredibly difficult for someone to start from scratch in this industry. The systems require you to have global access to data.
You have to be connected with your origins and destinations. So we think the systems themselves create a very, very large barrier. Additionally, we do think that we are much different with the quality of staff that we have working for us. We think that has a lot to do with the way that we compensate in our bonus program. And we haven't seen anybody that's been able to replicate that up to this point in time. So while we're certainly aware of what's happening from the market perspective, we just see opportunities. We look at it that less than 5% of the market share, we think we perform at a high level. We think those differentiators still matter in this market today, and there's opportunities.
Great. Thanks. Scott Group from Wolfe Research. So just to follow up on the low double-digit comment, is that a volume comment? Is that a net revenue and earnings comment? And if it's volume, how should we think about that leveraging to the bottom line from a margin perspective and where you think margins could potentially go?
Yeah. I think when we've talked about that, we think the low double-digit growth we think that number carries through all of our financial statements. We think it's gross, and it's net as well, as well as the operating income. We think those numbers have to track themselves over the long term. Our ability to take advantage of that from a margin standpoint really depends on what's happening in the marketplace, if there's spot pricing available, what's happening from a capacity standpoint. So a lot of that will be driven by the marketplace. As Jose has mentioned, as Dan's mentioned, we do very closely watch what's happening in the market. We work very closely with our carrier partners and take advantage of those opportunities when they exist. But when we talk about the low double-digit, we're focused gross, net, earnings per share. That's where our focus has been.
Okay. And then one for Brad since you'd like the questions on the balance sheet.
Wouldn't be right without it.
Exactly. So I'm not sure I follow the point on the U.S. versus non-U.S. cash if you're already taxing the non-U.S. cash at the higher rate. So it feels like we should be thinking about an all-in cash number, and it does feel like it's a high number. Can you maybe give a little bit more color on why you feel like you do need to keep that amount of cash on the balance sheet? And then you said, "We're not going to consider leverage," and maybe just walk us through the rationale on that.
I mean, the point of the $669 million that's overseas, the point there is it's two components. Our business requires a lot of working capital, more than what you might normally think because we do a lot of advances for duties and taxes for customers. That can be in a variety of different countries. So we keep an adequate amount of cash overseas on a regular basis, and that's just on an operating basis. Each year, we go through a process of determining what portion of that cash is going to be repatriated back to the United States. We do that country by country. We look at where we are in working capital, what our growth expectations are by country, what we think those additional working capitals may need to be. We analyze that literally country by country.
Then we declare and make a dividend back to the parent company. The point I was making on that process is that process does not create an additional tax expense for the customer or for us, sorry, because we've already accrued the tax when those earnings were earned at the local subsidiary. And that creates the tax liability. And that tax liability turns into a payable once the repatriation to the U.S. has been transacted. So it moves from a deferred tax payable to a current liability and then gets paid. So that's the process. The idea of the amount of money, the $669 million, that is what's over there at the time. We disclose that on a quarterly basis, and it gives you a good idea of how much cash is needed on an overseas basis to operate all of our subsidiaries.
So that was the point of that comment. The next element is related to how much cash does the company need to operate? That varies very regularly based on customer mix, what our additional ideas are for investments going forward. That's why I talked about investing in our company, whether that's real estate opportunities, things like that. We take the excess cash as it relates to the dividend and then make sure that we're meeting our objectives there and then what we're going to do with the excess cash. So that's the process that we go through. We don't believe that introducing a new risk to our balance sheet is a wise thing to do. What I'm talking about is borrowing money. We've also put away some money to make sure that we can weather a storm like we did in 2009. That's important to us.
We believe we can pick up market share during a storm. We want to be very strong when those events occur. We think we're well positioned to execute on all of those as we move forward.
Thank you.
Yeah. Jeff, Nate Brochmann from William Blair. And thank you as well for hosting the event. In terms of getting after that market share, and I know you're not going to go too far into any deeper on those strategic initiatives, but could you give us a sense in terms of the balance of whether more of the growth opportunity is going to come from, say, the example of putting more people into Europe in a better "focus" maybe versus some of these other newer services gaining some steam in terms of Transcon or distribution in terms of just the overall balance of where you think the opportunity is near-term and longer-term?
Yeah. I don't know that I can give you the balance of those, but I would tell you that we expect our additional business to come in multiple areas. One, we expect to be able to gain additional business from existing customers. Expeditors has always done a fantastic job at that. We've gotten in with customers. We've handled a small piece of business. And over time, we've gotten a larger and larger piece of their supply chain. So we remain focused on doing that. The second thing we're focused on is bringing what we would call new logos, so new clients to the organization, people who have not worked with us in the past. There are a number of customers out there. We do believe that certain products such as Transcon, Distribution will grow at a faster pace than the Air Freight and the Ocean Freight products.
The reason for that is simply it's a smaller base that they're starting with. We believe that all of those will be opportunities for growth for us as an organization.
And then just to follow on with that, particularly domestically, you're hearing a lot of different multimodal-type companies coming together and a lot of M&A and maybe seeing some shipper consolidation of working with those multimodal providers. How are you looking now at your customer base in terms of those other services of being more collaborative in terms of thinking about these different opportunities versus maybe the old just do the best à la carte on lane by lane type of service?
Yeah. So I think you're asking about our service providers, how we look at them first, and then how we look at our customers. From the service provider standpoint, we do have two fairly large service providers that we work with that have merged together. We've managed that relationship. That relationship is going very, very well for us still. We continue to manage that. So we're not so concerned about that. From the customer standpoint, we've always felt that we'll go after any business if it fits for us. We'll go after the full scale of the business or individual lane. So we tend to look at those things on a customer-by-customer basis. It's not usually a one-size-fits-all model. We will, again, focus on individual lanes if they make sense for us, or we'll focus on their entire supply chain.
Great. Thanks.
You bet.
Thanks. Matthew Young with Morningstar. Quick question to follow up on the market share. Wondering what opportunities you see in terms of taking share from direct shipper-ocean carrier relationships where, I guess, at this point, most of the business is direct with the ocean liners. And I'm just trying to get a sense of how much of that business has shifted to the forwarders and where you see that going.
Yeah. Dan, I'm going to let you talk about that. But we really can't get into percentages, but I think you can talk about what we saw in general with West Coast issues and how larger suppliers started looking at us directly.
Yeah. I can tell you the conversation changed a lot over the last probably 6-8 months where some of these very large importers are actively pursuing an NVOCC strategy as part of their capacity management, one that they can actually help kind of manage through the difficulties. These were customers that didn't entertain those thoughts before and are very open to those discussions and are doing this today. I think there's a big opportunity in that area.
Are they? Are they not?
I'll give a real example on that. As we went through the West Coast labor disruption issues, we had certain customers that had contracts, and the carriers they worked with called certain ports. Ports were impacted differently. Some ports, no cargo was moving. Some ports, cargo was moving at a much slower pace. Those customers had those direct contracts and, in some cases, couldn't move any of their cargo. So they came to us and said, "We know you work with multiple carriers. We know these other terminals are moving cargo faster. Can we look at you to move some of our cargo?" And we have multiples of those customers that have said, as Dan was saying earlier, that we want a process going forward where you remain a component of our mix.
From more of a secular, a bigger perspective, are the liners investing in their sales capabilities to gain share directly?
We haven't seen it. We think that what's happened over the years is they've invested less and less from the sales perspective. Dan was talking a little earlier about the NVO model. From the NVO perspective, the carriers historically have looked at the NVOs as they haven't liked us. They felt that we've taken business from them. We tend to look at it from a different perspective. We probably pay a higher rate than the direct customer does. We provide all the services. We provide all the connections. We think the carriers should be looking at us. If they don't want to invest in sales, if they don't want to invest in those systems, we can provide that. If we have a tight relationship with that carrier, work with one rather than working with hundreds. We see that as an opportunity.
Hi. Ken Hoexter from Bank of America Merrill Lynch. Thank you for the opportunity. Great to hear the story. I just want to stick on that ocean, on the consolidation side and the realignment of all the groups. Has that changed your margin? And then same thing on the air side. Has the move to more wide bodies from the freighters, does that structurally change your margin?
Jose, maybe you can talk a little bit on the air side, how the carriers are looking at capacity and pricing on passenger flights versus freighters. Maybe you could start.
Yeah. So there hasn't, when you look at freighters or you look at belly capacity, the pricing is the same. So it hasn't changed the dynamics in pricing. The fact of the matter is that there's just more space available when it comes to the belly side. Do we see that change anytime soon? We don't. You just see less freighter capacity out there. But as I mentioned earlier, because product is the size it is, you can fit more of it on the belly side but make no bones about it. There's still a requirement for upper deck cargo and such as that. But we haven't seen a change at all.
The thing about it on the air side is that the carriers have been much smarter about this. As they've added belly capacity in the past, they tended to look at belly capacity as if it were free space. And whatever I can sell it out as just extra profit I'm making. They never really looked at the additional fuel that it takes, the handling it requires at origin and destination. As they've gone to more capacity in the bellies, they understand that's their future of cargo. So they're treating it as the same way as they're treating the cargo space on their freighters.
Yeah. An example of that is that you've seen some passenger carriers over the past years just eliminate freighters because they look at the advantage of taking cargo in their belly. I think you'll see some of that trend still continue.
Yeah. On the ocean side, Dan, maybe you can talk a little bit about what you're seeing from the carriers from a pricing perspective.
Yeah. So I think what our customers are focused on right now, and I think the industry in general is focused on performance and stability. There's been so much sort of that's rocked their world through this congestion that's changed their purchase order lead times. They're more focused on making sure they have the right balance of NVO carrier mix and making sure they're getting the service levels. And this is more now than they're focused on getting the lowest rate. I think last year was a lot of folks were looking at the lowest rate. And it hurt them when it came time when it came crunch time and they needed space and they weren't getting it. So that's where the focus is. And that's maybe why the spot market has helped margins recently because there's not this focus.
And also, people don't really know how long these spot markets will last. They kind of move all over the place. And I think customers want stability in pricing.
And then back to Jeff or Brad, I guess, given the programs that you're running, is this now a long-term shift in the operating margin? You talked about the all-time record at 33%. Is that something that, given the changes you now see structurally staying at these levels, or is that 30% level still the kind of long-term bogey?
Yeah. If you look at the chart, we've been up 32, 33. I think our all-time high was 34.1. Yeah. That was our all-time high. We haven't been able to sustain that number that high. It's eventually moved back down a little bit. But I can tell you there is constant focus of slowly moving that number. We're going to continue to move that number to whatever level we can. One of the challenges we have is that we're already so much more efficient than the vast majority of our competition, it becomes harder to move that number. You somewhat become somewhat focused on what your market's doing. But there's absolutely focus to continue to drive that up. And historically, we've not been able to keep it at that 33%.
Okay. Thanks. Jeffrey Kauffman from Buckingham Research. I'd like to echo, thank you for hosting this day for all of us in the investment community. Question for Brad, probably a little more detail-oriented. One of the topics is transfer pricing. When you are moving goods between two stations, two continents, how do you divide the revenues and expenses between the origin and the destination? Because you have a cultural model that rewards handsomely at the division level for operating income. Then there's an override at the corporate level. How do you manage a situation where maybe because of currency differences or tax differences, corporate may be better off if we're allocating differently between origin and destination stations versus what the stations are going to want to do for their own P&Ls? How do you manage that process, and how do you decide how we allocate between them?
Well, the short answer is it's pretty prescribed in law in different countries that we operate in. So a lot of it is being driven by, essentially, on the freight side by a 50/50 profit split. And there's some change, there's different mechanisms in different countries. But our first starting point is a 50/50 profit split between origin and destination. And we run our it's important to note that we run management accounts in our internal reporting and basically try to create an environment where everybody's measured the same and performance is measured the same way. Then underneath that, you have statutory reporting, tax reporting, the different varieties of reporting that you need to do. And that's done on our statutory reporting and make adjustments to make sure that we're complying with the laws in all of those countries.
So it's really done. We separate the two is really the answer, is we make sure that we're complying with the local laws of each environment. But then, when we do reporting internally and measurement, that that's done in a process that's actually the same across all geographies.
If I can add, just, I just want to add that a little bit. When you look at our profit splits, there's usually a 50/50 profit split, or there's some sort of commission that's paid to origin and destination. That's designed in a way that both the origin and the destination offices profit on that business. We want them highly engaged. We don't have a model where one office makes all the profits and another office is not vested in it. So that's always been our model. But occasionally, we do get into situations where some offices are more profitable than other offices. I'll give you a real example I learned in my career. I happen to be the district manager of a San Francisco office.
San Francisco was an office that a tremendous amount of business was controlled out of San Francisco but didn't move in and out of that market. For those of you who know Peter, at one point, I had a conversation with Peter, and I said, "Peter, it kind of sucks being the district manager in San Francisco. You work really hard getting this business for the entire company. And then you have branches like Los Angeles that just sit around. The business comes to them." Peter's response to me was, "Move to Los Angeles." We tend to look at those things just pretty straightforward. Everybody has opportunities in their branch. It's their responsibility to take advantage of it and drive it.
Okay. And just one other follow-up on that. As you begin to build out these new services and make these investments for the strategic initiatives, you're incurring more expense in people and infrastructure. How do you be fair to the branches and allocate those costs as you the cost of growth, per se?
Yeah. If you look at our numbers and things that we've done, quite frankly, the headcount that we've added, it closely tracks the additional business that we've gained. So we don't believe that we've been in a position where we've put tremendous costs in our branches to keep up with these things. Really, what we're focused on, quite frankly, is realigning resources, having resources focusing on the things that drive the most value to the organization, so doing less of the things that aren't driving the right value for us and doing more of the things that we need to do. So we don't see an environment that we're putting tremendous cost pressures on our branch.
This is Ryan Muller. I'm also with Buckingham. I had a question about Dan had mentioned that carriers are looking at NVOCCs as an opportunity more and more these days. And Chris had talked about sharing more data with carriers, seemed like kind of more than ever. You made the comment that this activity kind of picked up in the last six-eight months. But has that really been? I think the perception out there is that this is more related to West Coast port congestion, this kind of collaboration, or is this more kind of a trend that you're seeing gain momentum over the past year or two as there's been more capacity in the ocean markets and these alliances are looking to cut costs and shift kind of part of their sales functions to forwarders?
Yeah. So our integration and our alignment with our carrier partners has really nothing to do with the West Coast port issues. It has everything to do with the strategy we laid out years ago, understanding that we're a non-asset-based provider. We need to be working with the right providers. We need to create an environment that we can drive the level of pricing that we need, at the same time, create an environment where those carriers remain profitable. To do that, we think both organizations need to invest in areas such as technology. We need to receive, we need to send bookings electronically. We need to receive booking detail back electronically. How do we take people out of that process and allow systems to do more of that work? So those are things that we started years ago. That focus hasn't changed.
That focus remains very tightly on how do we continue to do more integration. That's really nothing to do with the West Coast port issues.
Hey. Thank you. John Barnes, RBC Capital Markets. Couple of questions. Number one, I think you've kind of tried Europe once before, several years ago. It seems like maybe there are certain areas where maybe they're not as receptive to the culture, and especially the compensation structure. Do you see any limits to whether it's Europe or Africa or any other geographies where maybe that's a difficult that's a barrier that kind of prevents as much growth or market share capture as you'd like? There's maybe less receptivity to that.
So let me start talking about Europe and give you my thoughts on Europe. I think the Europeans tend to look at compensation differently than Americans do at times. Europeans want to know that they're taken care of and that they're comfortable with the way things are. We think our model works incredibly well so long as our branches are profitable. If they're getting a bonus, they're very happy because they're going to make more money in bonus than they're going to make with just sort of a base salary. So we're very confident that we will continue to do well in Europe. When we look at other markets, some of the challenges that we've seen in other markets really have nothing to do with our model, how we roll out our model. The bigger concerns are compliance in some of those markets. So you look at places like Africa.
You look at places like Russia. There's tremendous pressure on us and on our customers to deal with things like the Foreign Corrupt Practices Act. As we decide to go in those markets, we may have to do it in a little bit different way that incentivizes the right behavior and drives the right thing. So those are things that are in the back of our mind as we start thinking about these markets. We don't think that we're limited in those markets. It just may take a little bit different approach.
Yeah. All right. Secondly, as you think about, again, that low double-digit growth, you talked a little bit about the shift from air to ocean. We've obviously seen this trade down. And with ocean rates kind of under the kind of pressure they are, can you hit those targets with this modal shift going on? I mean, how do you balance maintaining your air exposure and not capturing so much ocean that it begins to put pressure because that revenue level is coming down? You're getting a nice net revenue margin, but on a cheaper product offering.
Yeah. Well, we sort of feel like we have been hitting them for the past year. We've done a pretty good job at that. So we think that we are hitting that. Of course, when we throw those numbers out, we're not looking just each quarter. We're thinking long-term and how do we get back to this on a consistent basis. Certainly, markets will come into play. Global economy will come into play. Those are all things in the back of our mind. But where we sit in the world today, what we see happen in the economy, what we see happen with global trade, we just think that's a realistic goal for us.
All right. And then lastly, just given how long you've been in Asia and especially China, can you talk a little bit about the recent Chinese devaluation? Based on your experience, is this a means of them attempting to export their way into greater prosperity? And if so, how long does that normally take to play through in terms of an uptick in volumes if it's possible? Thank you.
Yeah. I don't know that I'm the best person to answer that. What I would tell you is that I think China has kind of already exported their way into some form of dominance. They've done a very good job at that over the past 20 years. They've done a good job at that. Conceptually, the thought process of devaluing the currency makes their products more affordable, means that people will buy more of their products. I think there's another aspect of that that ties into it still needs consumers that are actually interested in those products and want to buy those products. So you could continue to devaluing your currency. At some point, I suspect people things get cheap enough for people want to buy them. But I think you still have to link what's happening from a global economic standpoint.
I don't know, it's just as easy as devaluing currency. But that's an uninformed opinion.
Rob Helf, Fiduciary Management. If you think about the ocean freight market and capacity coming on from what we can see for periods of a number of years, as well as this passenger aircraft situation, the belly space that you're talking about as well, and assuming that there's price transparency from your customers long-term, shouldn't that result in sort of deflationary pricing in your business longer-term than perhaps what we see currently?
Yeah. I think what really matters is what happens long-term with all these assets that exist from a capacity standpoint. And you have to ask yourself, "Are people going to continue investing and putting more vessels in the market when it's not driving the capacity they need and it's not providing the returns they need?" So right now, we have a lot of foreign governments that are supporting some of the steamship lines. At some point, you just have to wonder how much money will they continue to put in that. On the air side, what I would tell you is that the air capacity is not being driven by cargo. It's being driven by passenger demands. There's more passengers that are flying around the world. And the carriers are putting more aircraft in place to support that.
What we've seen is the carriers have done a very good job of maintaining their pricing. I can't tell you where that ends at. I think they want to make money off cargo. I think they're enjoying the money they're making off it right now. I suspect they're going to sort of hold firm and try and control their capacity and pricing a little bit.
Hey. Thank you. Bascome Majors from Susquehanna. One for Jeff here. You mentioned one of your strategic initiatives being the focus on having the branch level outgrow their particular market, however you're going to measure that market. I'm curious, did you see a pretty instant uptick to budget expectations as you began to implement these? And did you have a lot of underperforming branches that have since improved? Because it seems like your compensation philosophy would have already provided a lot of incentives that are kind of underlying that.
That's actually a very good question. When we started our budget process last year, for the first time in our history, we set out expectations for each of our branches. Prior to that, we allowed our branches to come back and tell us what they thought was appropriate growth. We changed that last year with all the data that we had available in the markets. We said, "At minimum, you will grow at this rate. You are free to add to that. And you're free to have conversations with us about why you can't achieve that. Maybe there's a customer you've lost. Maybe there's something happening in your market." What we've found is that when people are given clear direction on what the expectations are, they start to perform in a different manner. Compensation is certainly connected to that.
Expectations have to be connected as well too. We think by connecting those two things, we have seen a little bit of an uptick there.
Do you have a framework in place for those branches that maybe consistently miss that goal? How do you address that or have we not really crossed that bridge yet?
Yeah. No. We absolutely do. We have a structure of district managers, regional vice presidents, senior vice presidents that are deeply engaged with the P&Ls on a monthly basis, constantly reviewing that, constantly looking at what's happening from an expense standpoint, what's happening from a revenue standpoint. And those issues are absolutely being addressed.
And one for Brad as well. You mentioned the word opportunistic in your share repurchase strategy. And you've been very clear that you don't want to add leverage to the capital structure on a permanent basis. But you put up these really excellent results for a string of four or five quarters now. And your stock is trading closer to the lower end of where it's traded historically versus the higher end. Is this the kind of environment where opportunistic is? How do you define opportunistic? How do you look at your share repurchase? Is it a stock price? Is it a valuation? Can you just give us a thought of your thought process there, sir?
There's several elements that go into the thought process. You guys are all financial people. I think you guys all understand what those elements would be. Jeff and I talked about it. We've talked about it at the board level. Opportunistic is measured based upon where we think we are as a company relative to the trading value of the stock. I mean, that's really all I can say in terms of the way we think about it. Probably not going to disclose much more than that.
Thanks. Hi. Lance Davis here. I was wondering if you could discuss any threats or opportunities from technology in the next five years, specifically how technology may change your business model or may not change your business model or how competitors are using technology, how that may be a threat or opportunity. Thanks.
Yeah. So Chris talked about that, where we're constantly looking at technology, what's available, because we want to take advantage of it. At the same time, I think we need to be aware of the types of things that are occurring. One of the things that we're often questioned about is sort of the Uber of air cargo. And is that a realistic possibility that that can happen? We don't see that happening. We think our business is very tightly controlled. We think that capacity, while demand and capacity are not as tight as maybe they've been 10 years ago, a provider still has to have access to that capacity. They have to deliver cargo to a carrier on a regular basis. Or they won't have that capacity. There are other things that come into play such as known shippers. We can only accept cargo from known shippers.
It's not as easy as just setting a website up and start receiving cargo. There are very specific rules that tie into that that deal with the protection of that cargo, who's it coming from. So we believe there's a lot of barriers in play that prevent individuals from coming into the market and really disrupting the market from that perspective. But I will tell you that we look at it on a regular basis and assess and try and determine if those are things that we should be concerned about. But we're not seeing major things that we're worried about. I'm still on. [Uncertain] .
Hi. Alex Johnson on behalf of Tom Wadowitz and UBS. Just curious if you can talk a little bit about your ability to do export and import in China, what your licenses are there, what the cycle is for licenses. If you could talk a bit about that.
Yeah. So China's an interesting country. When we first went into China, you had to have a Chinese partner that you worked with. Since then, Expeditors owns our full rights to our facilities in China. We no longer have a partner in that market. We do have what was referred to as the Class A licenses. I will tell you that as much as we think and much as we believe that we have all the right licenses, those are constantly things that we have to look at. Each province is treated differently. Each local city government deals with things in different ways. So those are things that every time we make a move, we have to actually spend time understanding that and what that means to us. It's not incredibly clear how everything operates in China. It's not one way and one size fits all.
But we are confident with the import licenses that we have today. We've done that research. So we think we're in a good position from that standpoint.
Thank you, gentlemen. Bruce Chan here from Stifel. You talked about market share opportunities in places like Europe where your current penetration is relatively low. It seems like a lot of your European and even Asian competitors may be thinking similar things about the Americas and particularly eastbound transpacs. So I'm just wondering whether you're seeing any sort of competitive price pressure here in your home market. I know you talked about not losing share and how you might be responding to that.
Yeah. So we're constantly feeling price pressure in every market that we deal with. It's how we manage that and how we manage it with our customers on a day-to-day basis. I would tell you that when we look at places like Europe, one of the things in the back of our mind is that we've seen competitors make public statements about things that they've done over the past years to gain market share. Maybe that wasn't the right approach. Maybe they went after the wrong business. In the back of our mind, we look at that and see that as opportunities. We believe that maybe in the past, people have gone after market share purely for market share. Maybe now they're going to start focusing on profitable business. So we see those as opportunities. We certainly recognize the fact that Europe is a competitive market.
We've got major players in there. We're in the European market today. They probably don't want us in there much larger than we are today. We still believe there's a lot of business that fits in our model. From the North American side, like I said earlier, we constantly see pressure. We think we're managing it well.
All right. John Mims from FBR. So I wanted to ask you about the Transcon business as it relates to some of these strategic initiatives. Now that this has been up and running for a few years, is this going to be an ongoing kind of targeted white-glove, high-service offering? Or do you see this rolling more into a full-service truck brokerage offering that you could compete with the other big established brokers?
Yeah. We haven't made any efforts to try and get into truck brokerage business. We don't think that's the model that we fit in. We want to focus on the high-touch business so that white-glove business sort of fits the Expeditors model, the high level of service. That's where our focus is. That's where we believe our focus will remain. We've done a lot of work with building out our Transcon product in North America. We've done a lot of work building that Transcon product out in Europe. We're focused on opportunities that exist in Asia today. So we still believe there are tremendous opportunities. But it'll be in the high-touch business. We think that's where we fit.
Thanks for the follow-up. It's Scott Group. So I'm wondering if you can talk about just recent trends a little bit. I don't know if you're comfortable sharing July and August volume trends and then just your expectations for peak season.
Yeah. So we're not comfortable sharing trends. We're not comfortable forecasting. It's not something that we've done. It's not something that we plan to do from this point forward. As far as peak season, that's a tough one to predict what's going to happen with peak season. What drives peak season is certainly demand of product, are people buying products, are new products being launched, and what's happening from the supply side. I don't think while we're already sort of late in the months, I don't think we know enough about where that ends over the next two or three months. I will just tell you that we're keeping our finger on it. We're confident with the allocations and pricing that we have in place.
Maybe I was thinking a lot from the perspective of if you can share, are you planning for a strong peak, a tight peak? Brad, you had talked about some of the benefits in the second quarter from a spot pricing perspective. And it feels like maybe some of that should be continuing into the third quarter. But things could suddenly get tighter later in the year. And I want to think about how you're planning for that.
Yeah. I would just say we're planning the same way we planned for the first half of the year. Jose and Dan and Bill are very close with our carrier partners, again, just making sure that we have access to that space, making sure that our pricing's in line, and taking advantage of the opportunities that present themselves. That's about the extent that I would get into.
Yeah. This is Donald Broughton at Avondale Partners. You talked about how the volatility in fuel toll and fuel price had affected the margins and cost for your service providers, how it had affected capacity. Can you speak to how, if in any ways, the falling price of fuel, the volatility of fuel, has changed your demand dynamics, whether it be for ocean or air?
Yeah. There's a lot of questions: with the drop in fuel price, has it caused more customers to shift from ocean to air? And we've not seen that. The air price is so much higher than the ocean price today. We don't believe that the fuel rates can get down to a point where it will really drive that change. Additionally, as Jose pointed out, what we're seeing is that the air carriers are rolling their fuel surcharges into their base rates. And rather than giving that back, they're trying to reinvest in their business. So we really haven't seen a drop in their pricing overall. So really, no changes occurred as a result of the fuel price dropping to freight shifting from ocean back to air. I'm sorry. So demand from industrial to consumer, I don't yeah. We haven't seen anything on that. You bet.
Thanks. Benjamin Hartford with Baird. Maybe just jumping back on a question that was asked a few questions ago with regard to yields. Is there a view on the structural trend of yields in the industry? You've got some large competitors that have talked about planning for gross profit per unit, compression, offsetting it with volume and share gains, and process and productivity improvements internally. It seems like that's a similar strategy to what you have here. Is there a view on the structural trend to yields in the industry? And if it is lower, is that an environment that, in the end, can help you from the standpoint that you have the processes in place, you have the system in place to be able to make more vulnerable some competitors that don't have the type of assets that you guys have in place?
Yeah. What we see happen with yields, I think what we do at Expeditors is we try and manage our pricing as best as we can with the partners we work with. We try and manage the price we're selling to the customers as best as we can. And the end result of that and how we do that in an efficient manner really sort of drives our yields as an organization. Do we see changes occurring in that? That really comes down to supply and demand, what our competitors are going to do. I don't know. I don't know that I'm the best person to respond to what they're planning and what they're expecting. All I can really speak to is what we're doing. And we're trying to manage that. And we'll continue to try and manage that in the best way possible.
Anything you want to add to that?
Yeah. I will say that when it comes to pricing, we need everybody to kind of realize that most of the larger companies deal with several freight forwarders. There is a regular cadence of bid and proposal process that goes on that kind of makes sure that they're benchmarking their pricing against other freight forwarders during the process. That process is going on fairly regular in the market. The pricing competition on our side with the sell rate is regularly tested based upon where we on so that creates the part where we need to be competitive and always offering competitive rates to make sure that we're retaining business and growing business.
On the buy side, on our side, where we're purchasing is going into a lot of the things that Dan and José talked about and making sure that we're working with them on their opportunities and where they want to go with regard to pricing as well. So that process is happening constantly.
That falls into that, Brad. ROIC and ROE have improved over the past 12 months. But over the five years prior, it was down to 20%. And it had been, obviously, in the mid-20% type range, mid-20s throughout the mid-2000s. Is this a business, as you think about volume growth and the working capital commitments that that commands, is this a business where we should think about, call it a 20% I don't want to pin you down to a number, but a lower return on equity, lower return on invested capital profile business going forward than what we saw, arguably, in the peak time in the mid-2000s?
Well, I'm not going to forecast any of that. And I appreciate you not making me do that. I will say, though, I think that the things we're seeing on invested capital, we are definitely getting requests on a regular basis to increase our payment terms with large credit-worthy customers. That's a constant cadence that we're dealing with out there. And so we see some shift in kind of the I would characterize it as extended payment terms, as simple as that. We're also seeing that in some other areas related to contract negotiations as well. I think that's been occurring over time. And I don't see kind of big jumps in that. I think it really relates to more is to our operations with the customers we have in terms of these duty and tax payments, the repatriation process I talked about.
So I wouldn't expect any significant changes in that process as to where we are today. And as we've demonstrated our growth and our growth targets, we're looking to see those increase, obviously, as a result of that.
All right. Thanks for the follow-up. I wanted to ask about the infrastructure, specifically the U.S. and the lack of investment, and especially with the ports and the larger ships coming in, the chassis issues. Is a Transcon product something that can provide a solution to people that are getting held up due to the chassis solution or potential bottlenecks at the port that are related to a lack of investment? Or how do you view kind of this situation that we're looking at over the next five years?
Yeah. It takes chassis to get product out of the port so that Transcon can engage and help. But I'm going to ask Dan to talk about what we're seeing from port infrastructure with the Super Panamax vessels, what's happening. Because there's certainly some port infrastructure issues.
Yeah. So the fastest two-growing ports on the West Coast in North America were Prince Rupert and Manzanillo, Mexico. So I think that kind of shows where we're struggling from the U.S. West Coast ports. But it's going to take some time to sort all that out. I think there are pockets that are getting much better. It's still a huge issue with driver shortages. So even if you get the chassis, you're trying to find the driver. Or vice versa. You find the driver. You can't find the chassis. That's going to continue to be an issue. So yeah. I mean, I can't talk to specific infrastructure that's being developed port by port. I know Seattle-Tacoma has a port alliance. They're really geared towards sort of both fighting for money. Fighting for money as one unit and then making those infrastructure changes.
Long Beach, L.A., have been constantly looking at making things better there. But I think we've got ways to go. And yes, I do think Transcon has an opportunity. Because I think as there's different pockets that get corrected, once we can obtain the container and the freight on the West Coast, we have lots of options to help customers distribute that freight from that port.
Dan, can you talk a little about the infrastructure and simply the ability to unload these larger vessels?
Yeah. I mean, it used to be very consistent where a ship would come in and be unloaded and loaded within a two-four-day period. And now when you have a ship that comes in that's 13,000-14,000 TEUs, it's taking them some time to unload the ship. These ships are now in port docked for four-nine days. And so that adds congestion to the situation. And then although now that labor's fully back, that's helped. But you still have the length of loading and unloading as an ongoing issue. In fact, so much that some of the carriers have gone back to smaller ships to be more efficient getting in and out of the port.
So given your predecessor, sir, for 25 years in the role, the strategic review you've done has led to a number of changes that have led to positive results. Is this something? What's going to be the cadence of ongoing strategic reviews and assessments of it and the like? Is it something that's going to happen when your successor comes in 25 years? Or is it something you want to have on a three- or five-year cycle? Or how do you think about that?
Yeah. So I think we've put together a plan that sort of puts us out there for the next five years, things that we can focus on.
Having said that, I said earlier today when I was speaking that while we believe we're focused on the right things, we think we've backed it up with the appropriate data, with all of our knowledge, we also need to be aware of what's taking place in the market. We need to be able to shift when markets are changing. I think it's important that we have a strategy, that we have something that we're working towards. I do think it's important that we question ourselves and ask if that remains the right strategy. You'll find that we'll shift and we'll change at given times. I don't know when it's appropriate. I suspect that sometime we'll have a formal process where we'll sit down and question, "Are those the right thing?" I don't know if that's three years.
I don't know if that's five years. But I'm pretty confident with our senior team, we'll know when that time's right. And we'll do a thorough review of that strategy.
Okay. Well, again, I just want to thank everybody for coming in today. As I said earlier in one of my opening statements, I know that we have this sort of reputation as being a difficult company. We'd like to think that we're not a difficult company. I know that Brad and myself have put a lot of work in over the course of last year really reaching out to folks. Hopefully, this is another example of us making ourselves available. And I just want to thank you for your time and attendance today. I wish you all the best today. Thank you.
Very much. Appreciate it.
Thank you.