DHL makes big changes to it's air operations

Big changes ahead for DHL , ASTAR & ABX , lots of job losses a DHL announces yesterday the intention to subcontract US domestic flying to UPS . DHL will also reduce or emilinate service to some smaller communities. This is an effort to stem the hundreds of millions of dollars in losses

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DHL's plan to shift its US air lift from ABX Air and Astar Air Cargo to rival UPS leaves the fate of both airlines and the DHL-owned Wilmington, Ohio, air hub in limbo, with thousands of job losses and dozens of aircraft sales possible.

The transition from ABX and Astar to UPS likely will take 12-18 months (ATWOnline, May 29). DHL hopes to finalize a contract with UPS within the next three months and likely won't be able to make any definitive moves until the exact language is determined.

Ohio's Wilmington News Journal reported yesterday that ABX has informed its 10,000 employees that more than 6,000 could lose their jobs. David Ross, president of Airline Professional Assn./Teamsters Local 1224 representing ABX pilots, said management "was caught flat-footed by DHL's decision" and warned that "massive job loss" is possible.

But ABX spokesperson Beth Huber told ATWOnline, "We don't know how the [DHL-UPS] negotiations will come out. Until we know, it's business as usual. We still have planes coming in tonight."

ABX already had been moving to diversify its business, forming a new parent holding company, Air Transport Services Group, following its acquisition last year of several smaller cargo operators. "We don't want to be in a position where we have 90% of our business from one customer," ATSG President and CEO Joe Hete told this website late last year. Still, DHL-related business comprised $280.8 million of its total $382.1 million in revenue for the first quarter.

DHL Americas Communications Director Jonathan Baker confirmed that all US air package sorting would be handled by UPS at its Louisville hub and that Wilmington would cease to be used "as a domestic air hub." He left open the possibility that DHL could operate international flights to the airport, which it owns. Its largest US ground sorting facility is adjacent to the airport and "we'll need that going forward," he said.

ABX operates 55 DC-9Fs and 30 767Fs on DHL services, with 11 additional 767Fs used for its other operations, including two that support ANA cargo operations in Asia. ABX said its agreement with DHL includes a provision that would allow it "to sell back to DHL any aircraft removed from DHL's network at. . .fair market value." It values its DC-9Fs at $19 million each.

As for Astar, DHL last year acquired a 49% minority equity interest and a 24.9% voting interest in the airline. Baker confirmed that all of Astar's air lift would be moved to UPS but said that no decision "as yet" has been made regarding DHL's stake. Astar operated 29 727-200Fs, nine DC-8Fs and six A300B4-200Fs as of year-end 2007.