Parent Company Announced Switch To UPS In May

A large cargo operation's plans to switch to UPS for its air freight business has brought out a competitive streak in the company facing the loss of its biggest contract.

As ANN reported, German package delivery conglomerate Deutsche Post AG -- parent company of DHL Express USA -- announced in May it planned to farm out its airborne freight business to UPS. The move is part of a $2 billion plan to recover from years of losses at DHL's North American operation.

Though profitable on a global scale, DHL's operations in America have never made money, due to fierce competition from FedEx and UPS. DHL has ranked a distant third in overnight delivery business in the United States, and is poised to lose $1.3 billion this year.

ABX now flies a significant portion of DHL air freight, using a mixed fleet of Douglas DC-8s and DC-9s, and Boeing 767s. Business from DHL accounted for 73 percent of ABX's 2007 revenue, and 43 percent of its earnings.

According to Dow Jones, US cargo hauler ABX Air has made numerous efforts to persuade Deutsche Post to not switch its airborne cargo services to UPS. Joe Hete, president and CEO of ABX parent Air Transport Services Group Inc., said "numerous attempts" have been made since then to persuade Deutsche Post to reconsider the switch.

Hete says his company's offering is more competitive than the UPS agreement. He also stressed that even if ABX does lose the DHL contract, the company could survive through diversification.

FMI: www.abxair.com, www.dhl.com, www.ups.com