FedEx, UPS, Post Office To Pick Up Remnants

This week's announcement by delivery company DHL that it will drastically slash its air and ground operations in North America leaves air cargo shippers scrambling for alternatives, and possibly facing higher prices as a result.

Things appear dire for DHL. As ANN reported in May, Deutsche Post AG -- the German parent of DHL, fourth-largest cargo shipper in the world -- had hoped to sell off its air cargo service in the United States to rival UPS, conceding the market to that company and FedEx.

At that time, the company had planned to continue its ground-shipping operations... but those plans also came to an abrupt halt Monday, with the announcement DHL will end all US domestic-only services, both air and ground. Effective January 30, the company will only ship packages internationally.

As a result, 9,500 US jobs are expected to be cut... marking the end of DHL's five-year attempt to capture a significant share of the US cargo business, which began with the company's 2003 purchase of Airborne Express.

That shutdown leaves FedEx and UPS -- and, to a lesser extent, the US Postal Service -- to handle the bulk of domestic shipments once handled by DHL. That may lead to higher cargo prices down the road, though it will also serve to bolster those companies' bottom lines.

"The real upside might be two, three or four years down the road, when the economy is feeling better and FedEx and UPS are able to raise prices, because they won't have another competitor nipping at their heels," Avondale Partners analyst Donald Broughton told The Associated Press.

As for the proposed deal with UPS, talks are reportedly still underway... but have been scaled back. "Today's announcement by DHL certainly could affect the size and scope of that contract," UPS spokesman Norman Black said Monday. "We'll go back into talks and see what develops...

"The only thing that's left is moving international packages once they get to the US border," Black added. "That's a dramatically lower amount of volume than what they were originally talking to us about."

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