Thu, Jul 03, 2008
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.
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