ABX Air aims for smaller but more profitable post-DHL future

ABX Air is planning for a post-DHL future based on a smaller but more profitable business with other customers.
Joe Hete, President of the airline’s parent company Air Transport Services Group (ATSG), told analysts and investors in a conference call that the company still believed it could offer DHL a competitive model compared to the planned DHL-UPS cooperation, and warned that the connection of the two global air express networks could prove “expensive and challenging”.
Admitting that the transition from DHL operations would not be easy, Hete commented: “We expect ABX to grow and prosper without DHL.” DHL currently accounts for about 74 pct of ABX Air revenues.
ABX Air had already been diversifying its customer base for several years and was well-positioned to place the B767 fleet with other customers on a wet-lease or dry-lease basis, Hete said. About half of the DHL-dedicated B767s could be placed with other customers, he added. Key customers include USPS, the US military and freight forwarder Schenker BAX.
CFO Quint Turner noted that ABX’s activities for DHL had been “low-margin business” and stressed that the company believed it could generate a higher return on capital from other customers. Although ABX has a ‘put’ option to return aircraft to DHL, the planes have a low book value, and higher prices might be achievable if the planes were sold on the open market, executives noted.
ATSG is also talking with DHL about severance packages for ABX pilots and aircraft mechanics.

ABX Air is planning for a post-DHL future based on a smaller but more profitable business with other customers after DHL Express transfers its North American uplift to UPS, senior executives said yesterday.
Joe Hete, president of the airline’s parent company Air Transport Services Group (ATSG), told analysts and investors in a conference call that the company still believed it could offer DHL a competitive model compared to the planned DHL-UPS cooperation, and warned that the connection of the two global air express networks could prove “expensive and challenging”. About 6,000 jobs at ABX Air, 1,200 at DHL and 1,000 at Astar Air Cargo will be impacted by the DHL restructuring, he reiterated.
ABX Air currently operates 31 of its 44 B767s and 55 DC-9s for DHL under their sub-contracting agreement. Under the phasing-out of DHL uplift, 23 DC-9s will be taken out of service by the end of this year. Hete said he did not know when the first of the B767s would be removed from service. DHL has said it aims to replace ABX and Astar Air Cargo with UPS by late 2009.
Admitting that the transition from DHL operations would not be easy, Hete commented: “We expect ABX to grow and prosper without DHL.” DHL currently accounts for about 74 pct of ABX Air revenues.
ABX Air had already been diversifying its customer base for several years and was well-positioned to place the B767 fleet with other customers on a wet-lease or dry-lease basis, Hete said. About half of the DHL-dedicated B767s could be placed with other customers, he added. Key customers include USPS, the US military and freight forwarder Schenker BAX.
CFO Quint Turner noted that ABX’s activities for DHL had been “low-margin business” and stressed that the company believed it could generate a higher return on capital from other customers. Although ABX has a ‘put’ option to return aircraft to DHL, the planes have a low book value, and higher prices might be achievable if the planes were sold on the open market, executives noted.
ATSG is also talking with DHL about severance packages for ABX pilots and aircraft mechanics. DHL officials have reportedly indicated that the company may be ready to return the airport, which it owns, and the facilities to the local community.