DHL Sees Loss As FedEx, UPS Dominate

[S2B]

NEW YORK (AP) -- Shares of United Parcel Service Inc. moved higher in trading Wednesday, while DHL Express appears not to be garnering the U.S. market share it originally expected.

Germany's Deutsche Post AG, which owns DHL, earlier told Wall Street that launching a delivery service to compete against UPS and Federal Express Corp. would lead to a $369 million loss for the year. The company upped that amount by another $247 million on Wednesday, saying it does not expect to break even until 2006 -- a year later than previously expected.

"We will do everything it takes to succeed in the very competitive U.S. market and generate sustainable profits for our shareholders," said Deutsche Post chief financial officer Edgar Ernst in a statement. "The group is well on track and well positioned to confront the great challenges that lie ahead in North America."

Shares of Deutsche Post, which bought Airborne Inc. in the United States in order to launch DHL's ground services, on Wednesday fell 4 percent in trading on the DAX. UPS shares closed up $1.03, or 1.4 percent, to $75.56 on the New York Stock Exchange. FedEx -- which recently acquired Kinkos -- saw shares dip 16 cents to end the day at $85.04.

Deutsche Post said it might take longer than expected to beef up DHL to compete more successfully against UPS and FedEx. Right now FedEx and UPS control about 90 percent of the U.S. market, according to a report from Fitch Ratings.

"The announcement that breakeven of DHL in the U.S. has been postponed illustrates how challenging it is for a small newcomer to establish a sustainable business model in a market arch-dominated by a powerful duopoly such as UPS and FedEx," the rating agency said in a report.

Fitch said DHL still doesn't have the size that would enable it to maintain profitability, while its two bigger rivals should continue to see strong financial results. The agency also that customer demand for more ground services -- where DHL has to build a network almost from scratch -- makes matters worse.

"Organic growth alone may not be sufficient to reach the critical scale" that DHL needs, the report said. "The problem is that the US is currently the main market for the express and parcel business in the world, feeding the rest of the worldwide business. Deutsche Post cannot afford not to be there."

 

[ABXbooger]

I read a different article, and it said basically the same stuff. It also said that although DHL US won't be profitable until 2006 the analysts where much more satisfied with the projections. It also said DHL would be increasing spending to increase infrastructure, increase service and other improvements.

All I can say is that freight volume is way up. We are seeing record loads right now. I can't even imagine what christmas will be like.

I have also heard that many stations that now have through flights only are wanting their own terminating aircraft so they can increase their loads. That would be a significant increase in flights.

 

[S2B]

I thought this was really a positive article, even though it has the word "loss" in it. It shows that DHL is willing to invest heavily in this market and take a "loss" for a few years to position itself to become #1 in the market (eventually).

 

[VABB]

I think brand recognition is going to be a big problem for DHL. People use the terms "UPS" and "FedEx" like they use the words "Coke" and "Kleenex". Also, people have been using UPS and FedEx (sometimes interchangeably) for a very long time and may be reluctant to change to a new service.

I think DHL is going to be successful, but I don't see them overtaking UPS or FedEx anytime soon.

 

[freightdawgs]

"I DHL'ed it this morning"

that sounds ok to me.

 

[Noah1825]

Abx Job Page-no Openings In Flight Department

Question For Abxbooger- With the increase in flights, any ideas when they may start accepting resume's and interviewing?

 

[SpiffAV8]

All I can say is that freight volume is way up. We are seeing record loads right now. I can't even imagine what christmas will be like.

Part of that increase in volume might be due to freight coming off other aircraft. I used to move 5000lbs a day, now my load is less than half that. I just hope you don't pick up any more of it or I am out of a job!

 

[T-Gates]

Part of that increase in volume might be due to freight coming off other aircraft. I used to move 5000lbs a day, now my load is less than half that. I just hope you don't pick up any more of it or I am out of a job!

I'm assuming you feed DHL into Cincy.... Considering almost every single one of the feeder runs to CVG are mirrored with a DC-9 (In some cases 2) to ILN, I think the abundance of feeders on the CVG ramp won't be present this time next year in ILN.

Just my .02 (Former CVG Feeder Slave)

 

[SpiffAV8]

I'm assuming you feed DHL into Cincy.... Considering almost every single one of the feeder runs to CVG are mirrored with a DC-9 (In some cases 2) to ILN, I think the abundance of feeders on the CVG ramp won't be present this time next year in ILN.

Just my .02 (Former CVG Feeder Slave)Today 18:01

Nope not in or out of CVG. You got it right though, the DC-9 does mirror most of the feeder runs. Once all the frieght goes to the same place I think things are done for the feeders. I hope that's not the case!

 

[ABXFLYR]

Part of that increase in volume might be due to freight coming off other aircraft. I used to move 5000lbs a day, now my load is less than half that. I just hope you don't pick up any more of it or I am out of a job!

In a recent bottoms up brief, we were told that overall volume through the sort was already at XMAS levels. This would already include freight off the feeders. So it's not your freight artificially making the numbers look better. This consolidation is just getting started, and I sincerely hope there's enough out there for everyone.

Regarding hiring, no one really knows. We were told that there are about 17 left on the street that want to come back, after the recent recalls. Given that we have more about 30 retirements between now and the end of 2005, hiring might be a very real possibility, unless the consolidation thing affects our requirements. Additionally, we were told that about 30 remain active in the hiring pool. Not sure how active that pool could be...I imagine it's probably covered in moss and algae now.