FedEx, UPS look to gain if DHL scales back
Analysts expect money-losing DHL will scale back in the United States and could make the announcement as early as today, handing FedEx Corp. and UPS a boon.
If DHL closes terminals and hubs, analysts say FedEx could get 35 percent of the lost business in the air and another 25 percent on the ground.
If the restructuring costs DHL 2 percent of revenue, FedEx stands to gain USD 45 million in business, according to a research note published Wednesday by Edward Wolfe. UPS, which has a more powerful ground network, stands to realize USD 71 million.
DHL is the fourth-largest player in the U.S. overnight package business, with revenues in the Americas for 2008 estimated at USD 2.3 billion.
With 9 percent market share, DHL trails the U.S. Postal Service, (32 percent) FedEx (31 percent) and UPS (25 percent).
DHL joined the competitive U.S. overnight business in 2003 when it purchased Airborne Freight for about USD 1 billion, rankling FedEx and UPS, which accused the monopoly Deutsche Post of investing in a U.S. carrier to fight them on their own turf.
Both pressed the issue in lawsuits, which Airborne eventually won.
Airborne was the low-cost alternative to the big players, claiming about 10 percent of the domestic air express market and 2 percent on the ground.
DHL came in promising a threat to the established carriers, but in reality has kicked little sand in their faces, mostly because it has made a series of integration and operational errors that shook customer confidence.
Analysts estimate DHL has lost USD 2.8 billion in North America, including a recent USD 748 million write-down in the United States alone, where it has also announced 600 layoffs.
Wolfe expects DHL will close 85 small ground and air terminals — as much as 25 percent of its U.S. capacity — to stem the losses.
Tuesday, Deutsche Post said it planned to split its logistics division into two divisions with separate executive boards. A second announcement could come today when Deutsche Post meets with analysts in Bonn, Germany.
For months, the buzz has been that FedEx or UPS was planning to buy the U.S. assets. That seems unlikely, based on antitrust issues, experts say.
