Kentucky and Ohio compete to keep DHL jobs

Ohio and Kentucky have been thrust into a competition to keep and possibly expand their DHL cargo hubs, a major employer in both states.

Both states are putting together tax incentive packages to persuade DHL to choose one over the other. Thousands of jobs may be at stake in what could be one of the most expensive contests between the two states to keep and expand jobs.

DHL, which operates an air hub and package sorting facility at Cincinnati/Northern Kentucky International Airport, is considering consolidating that hub with a larger one it now owns in Wilmington, Ohio, just 50 miles to the north, said DHL spokesman Jonathan Baker.

DHL bought Airborne Express last summer and insisted it would keep both its Cincinnati facility and a similar operation at Airborne's Wilmington airport. But the company changed its tune after the closing of the $1 billion deal and an ongoing consolidation of other DHL operations.

The stakes are high:

More than 6,000 employees at the Wilmington facility would be affected by the decision. The facility is the largest employer in the five counties surrounding Wilmington. Airborne, now owned by DHL, owns the airport there, but it contracts with ABX Air to run it.

DHL employs about 1,200 workers at Cincinnati/Northern Kentucky airport, according to the company, including 400 full-time workers. Another 1,000 work for Astar, the airline that serves DHL.

With so many jobs at stake, officials on both sides of the river are working to court DHL.

Officials with the Ohio Department of Development confirmed they are in discussions with the company about potential incentives to retain and add jobs.

"We're involved in developing a comprehensive and competitive incentive package. We want to keep those jobs in Ohio," said Maria Smith, a spokeswoman with the department.

Northern Kentucky Tri-Ed, which works with Kentucky economic development officials to recruit and retain businesses in Northern Kentucky, won't discuss details of its effort to retain DHL.

But Tri-Ed President Danny Fore said, "I think it is fair to say that everybody can be assured that the Kentucky Economic Development Cabinet, Northern Kentucky Tri-Ed and also Boone County are in close dialogue with DHL."

Boone County Administrator Jim Parsons deferred comment to Tri- Ed except to say, "DHL is certainly an important business to Boone County and Northern Kentucky."

A spokeswoman for the Kentucky Economic Development Cabinet would not comment on any efforts being made in Frankfort.

Although Baker acknowledged DHL is considering consolidation, he said the company may still opt to keep both facilities.

"We're continuing to look at various options and alternatives," Baker said.

"It might include the possibility of operating out of both hubs."

Cincinnati/Northern Kentucky airport consultants have for months been developing alternatives for all three DHL scenarios — continued normal growth, loss of DHL at the airport or merging Wilmington's operations into Cincinnati/Northern Kentucky International's.

Airport spokesman Ted Bushelman said the airport has plenty of space for Airborne's 115 cargo planes that are based in Wilmington.

Observers are hesitant to handicap the Cincinnati hub's chances of remaining in the center of the DHL network.

The Wilmington facility processes more than six times as many packages as Cincinnati/Northern Kentucky, but the Kentucky facility was recently upgraded by DHL at a cost of more than $200 million.

One analyst said it would make sense for DHL to integrate its Airborne operations as it prepares to go after U.S. rivals United Parcel Service and FedEx Corp., which have roughly 79 percent of the domestic express delivery market.

"They're integrating and consolidating to become more efficient right now," said David Campbell, an analyst with Thompson Davis & Co. in Richmond, Va. He speculated DHL wouldn't be able to add U.S. market share until 2006.

ABX Air officials acknowledge DHL is considering changes that could impact the company, from which it gets 98 percent of its $1.2 billion in revenue.

ABX flies and services the planes carrying cargo out of Wilmington, and also handles the sorting facility that processes packages for DHL.

ABX employs more than 6,,000 workers, including 4,000 full-time.

Company officials said they couldn't speculate on DHL's plans.

Rob Boyd, president of Airline Professionals Association Teamsters Local 1224, said the 825 pilots in his union have for months gotten signals from DHL that a consolidation was on the way.

He speculated the pilots wouldn't be affected until DHL decided whether to combine its fleets, which he predicted would happen after ground operations were integrated.

"Between the systems there's a lot of overlap," he said. "It doesn't make sense to fly planes that might not be full.

"Until they reach the size of a FedEx or UPS it doesn't make sense to have so many hubs."

"I wish we knew what DHL is going to do," said Mark Brook, the Clinton County, Ohio, administrator and director of economic development.

"It's a huge concern."

While Cincinnati/Northern Kentucky is in an area enjoying robust population and economic growth, the loss of so many jobs would be a serious blow.

John Domaschko, Kenton County Airport Board chairman, said Cincinnati/Northern Kentucky has advantages in its favor in a tough competition.

"One of them is the fact that Delta Airlines and Comair are both here," he said.

"DHL and Delta have worked together in the past with cargo capacity, and that makes it a nice situation for both of them," he said.

Domaschko suggested that his airport has the benefit of being owned and operated by the Kenton County airport board, freeing DHL to focus on its primary mission — delivering packages — rather than also running Wilmington's airport as a private owner.

"I think it does help to be able to focus your energy in one direction and do that really well," he said.

Being in the heart of Greater Cincinnati is another advantage, he said. "We're a larger metropolitan area. I think that is an advantage for anybody who might be working here for DHL.

"We have all the things to offer that any chamber of commerce would market — the arts, sports, all of those quality of life factors."

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About DHL

DHL offers air express service to 120,000 destinations worldwide.

It has 188 hubs and 238 gateways.

Total employment is 150,000, in about 5,000 offices.