Airborne unveils nationwide ground service

Airborne Express, faced with an earnings slump and increased competition, has launched a new nationwide ground-delivery service.

Carl Donaway, president of the Seattle-based package express company, said Airborne decided to offer the less expensive alternative to its air delivery service in response to competition from rivals United Parcel Service and Federal Express.

“We feel it is essential to be able to offer full (ground capability) in this competitive environment,” Donaway said.

The service was launched on a limited basis April 2, said Robert Mintz, a company spokesman. The company, which officially announced the service late Thursday, has been rolling it out on a gradual basis the past few weeks.

Airborne hopes to increase business from its existing corporate clients and is less focused on attracting new customers with the service, Donaway said. Rich Corrado, Airborne’s vice president of marketing, said the carrier hopes to recapture business that it has lost to FedEx and UPS over the past year or two by leveraging its existing air network to serve customers who want slower, but cheaper, ground deliveries.

Airborne expects the service to add 15,000 deliveries a day within three months.

The new business will require an initial investment of about $30 million, Donaway said. Because the company already moves some of its cargo on the ground and can use existing storage facilities, the cost of setting up the service is relatively small.

He said he could not predict when the company might see a profit from the move.

Asked if Airborne was afraid that it might be cannibalizing its air business by offering ground service, Corrado responded that FedEx and UPS face the same issue. “When you launch overnight trucking, it has the ability to compete with air.” Corrado added that a lot of its regional air express traffic already moves on the ground.

Airborne’s financial performance has been hurt by the slowing economy. The company warned this week that its first-quarter earnings would be at the low end of analysts’ expectations. Analysts polled by Thomson Financial/First Call had predicted Airborne would post a loss of 15 to 36 cents a share.

The company said it would offer more specific first-quarter estimates on Monday. Its first-quarter results are due out May 1.

Donaway said Airborne began planning the new service nine months ago. He said the economic slowdown might actually help the new operation because ground service is less expensive than shipping goods by air.

“I think it’s very complementary to what’s taking place in the economy,” he said.

Airborne’s competitors also have been hurt by the economy, but in general have performed better than Airborne.