Loud protests of US Express duopoly have familiar ring to them
The uproar in the United States about who is pulling the strings behind DHL Airways and Deutsche Post's proposed purchase of Airborne Express has a familiar timbre to it.
As is often the case, politics, especially the politics of profit making, makes for strange bedfellows. Arch-rivals Federal Express (FedEx) and United Parcel Service (UPS), whose names are dirty words in the oppositions' Memphis and Atlanta headquarters, have banded together to block what they see as a sinister incursion into their US$30 billion domestic air cargo market by the subsidiaries of the German postal giant.
DHL Worldwide Express has made no secret of its desire to enter in a substantial way into the lucrative United States market; its proposed US$1.05 billion purchase of one of America's largest forwarders, Airborne, and its fleet of 15,000 trucks attested loudly to that last month.
Its interest, it seems, is unwelcome in what has become a cosy little domestic arrangement.
Stop me when this starts to sound familiar. According to the Atlanta-based Colography Group survey of 30,000 US shippers, overnight letters accounted for 55 per cent of all overnight air delivery volume in the US last year.
Between them, UPS and FedEx controlled 75 per cent of the overnight letter market. They also controlled 75 per cent of express ground volumes.
In local parlance, we call that a duopoly, a term derived from the situation we have at our main container terminals.
To be fair to the American express operators, competitors along the waterfront in Hong Kong would be lucky to carve a quarter of the market.
UPS and FedEx's objections to DHL's entry into the US domestic market are not surprising really. Deutsche Post has never been afraid to use its weight to tilt playing fields in its favour in the past, to which its settlement 10 years ago with the European Commission for the illegal subsidisation of DHL Worldwide Express in Europe attests.
But, more importantly, DHL does more high-yield international express cargo business than UPS and FedEx combined and would probably give both more than a bloody nose on their own turf. A DHL air express network in the US fortified with Airborne's ground fleet would probably feast on the small and medium-sized enterprises (SMEs) whose executives FedEx and UPS may not coddle as much as those from their bigger accounts.
Ironically, the business from the SME sector would have higher profit margins as the smaller companies would be unable to leverage volume for lower rates, unlike the multinationals so fond of squeezing every last penny from their transport providers.
Nevertheless, you would not be alone, or even in a minority outside the US, if you found it ironic that the two greatest proponents of free skies for everyone else's markets are so vigorously oiling the legislative war wagons on Capitol Hill to insist on protection for their own patch.
Is the ring familiar yet? That's right, it sounds just like Hong Kong where the most vocal supporters of unrestricted freeenterprise capitalism rail at the thought of competition being injected into their highly lucrative logistics sector fiefdoms.
Aside from their joint venture in OnePort, the new electronic trade management portal launched last year, Hutchison Whampoa and Wharf (Holdings) have long been intense rivals. But you could bet they would set aside their differences in a heartbeat to band together if, say, P&O Ports or APM Terminals were on the verge of getting a foothold in Hong Kong's core container-terminal sector.
The suspicion that Hopewell Holdings chairman Sir Gordon Wu Ying-sheung's blueprint for a HK$15 billion bridge linking the eastern side of Lantau Island with Macau and Zhuhai on the mainland might also include plans for an extensive deep-sea container terminal had existing operators temporarily apoplectic. Imagine how loud the alarm bells would ring if a formal tender went out for real rivalry at the port.
The US Department of Transport will in August hear arguments as to whether DHL Airways' ownership fits American regulatory requirements.
Below Deck will be watching the developments closely. Because there's nothing that gives me the warm fuzzy feeling of being close to home like the whining of a duopoly whose patch has a new footprint.
