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DHL-What's going to happen?

ABXbooger

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Below is a story about DHL announcing when they are going to shake up there US ops. Makes me really nervous...

Analysts hand DHL bad new year's forecast
By Kimberly Pierceall,


Worldwide shipper DHL is doomed to fail in the United States unless it radically shifts its business model, two well-regarded investment firms say. Three years ago, the European-based corporation was lauded locally for bringing jobs and cache when it opened a western hub at the former March Air Force Base near Riverside. Now, Morgan Stanley and Bear Stearns separately contend that DHL could eventually contract out operations to competitors, abandon its domestic delivery routes or sell off its U.S. operations entirely. Facing U.S. operations that lost $900 million last year, the company's new chief financial officer has "indicated the group needs to have a structural solution to U.S. losses" by March 6, according to the Morgan Stanley report.

DHL defends its U.S. business strategy.
"While we can't respond to speculative reports, we have made a commitment to the U.S. market because of its importance to our overall global (DHL) Express strategy," spokesman Richard Gibbs said in an e-mailed statement. DHL's landlord at March Air Reserve Base, March GlobalPort, remains adamant that the shipper is committed to the area and job growth and dismisses the Wall Street analysts. "This is the plum. This is not going to happen again," said March GlobalPort investor Bob Wolf, president of Germania Corp. in Riverside. "I wholeheartedly believe in DHL and in this facility." "We have identified many millions of square feet of industrial space that are locating here with their accompanying jobs as a direct result of the proximity of DHL."
Riverside County Supervisor Bob Buster, a member of the March Joint Powers Commission and an outspoken critic of the DHL plan, said someone should have asked whether the shipper could compete in a market already dominated by UPS and FedEx, which use LA/Ontario International Airport, before it arrived in Riverside. Instead DHL was touted as "the biggest plum in 30 years," Buster said. It would be a magnet for other businesses. "Everything was all hinged around DHL," he said. Inland economist John Husing said it would be difficult to trace job growth in a region to one business.
"Certainly whether it's because DHL was there or because there's a lack of land along the (Interstate) 15, we've seen a relatively large employee base now being created," he said. "To some extent, DHL is probably a piece of that calculation." The nearby Meridian business park, developed by LNR property corporation and also overseen by the March Joint Powers Authority, is expected to generate 12,000 to 15,000 jobs with its eventual 12.2 million square feet of industrial and office space. "I can't point to any particular user that located at Meridian because of DHL. I'm sure some of them are using DHL's services. And others are probably using FedEx or UPS," said Michael Morris, LNR vice president of commercial development.

DHL, owned by German-based Deutsche Post, has spent billions of dollars to build up its domestic presence. Nonetheless, U.S. operations lost $900 million last year and analysts don't foresee a profit this year. DHL has one nightly international flight out of March to and from Hong Kong and has talked about adding another. Flights to Asia also come from Los Angeles and San Francisco airports as well as its Wilmington, Ohio, hub and New York's John F. Kennedy Airport.

Seven domestic flights take off from March nightly.
"The part that's killing them is domestic," said London-based Bear Stearns analyst Andrew Beh by phone. A Morgan Stanley analyst wrote in a Jan. 7 report that DHL's current situation is akin to the Daimler-Chrysler auto brand before Daimler let loose of its U.S. operations. Morgan Stanley foresees three possible solutions:

Deutsche Post should try to sell all of DHL Express or at least the U.S. operations to UPS, FedEx or the U.S. Postal Service

DHL could fly parcels in but contract delivery to FedEx, UPS or the U.S. Postal Service
It could reduce its footprint to metropolitan areas and either contract pickup and delivery in the rest of the U.S. to the three carriers or offer only international delivery.
The first two options are less likely, according to Morgan Stanley. In a November Goldman Sachs report, the firm said it was unlikely that DHL's U.S. operation was on track to perform well. "The weakness of (DHL in the U.S.) and management's failure to stand by earlier guidance that it would break even in 2009 make a major dent in that case," the report says.
Hard to Stay Or to Go
Beh of Bear Sterns said any DHL decision to quit domestic operations would be difficult. "Think of all the contracts they have with all the airlines, the unions, the customers ... there's so much to sort out let alone if they're going to be exiting anything," Beh said. The company has invested more than $3 billion in the U.S., with nearly half going toward infrastructure and distribution since 2003, Gibbs, the DHL spokesman, said in an e-mail statement. "Despite tighter economic conditions, our U.S. business continues to demonstrate improvements in its overall service levels and competitiveness," according to Gibbs.
Worldwide, the company has earned annual revenues of $80 billion. Gibbs said the company is dependent on the United States to serve its international customers in Canada, Latin America, Asia and Europe where the company has a strong presence. At Wednesday's monthly March Joint Powers Commission meeting, residents living in the flight path, who have vocally protested DHL's late-night jet noise, pointed to the financial reports as a reason for the March authority to cut ties with the shipper.
"DHL is hemorrhaging," said Catherine Barrett-Fischer, the group's leader. "We should help DHL get out of their contract." At the end of the meeting, the commission's chairman, Riverside Councilman Frank Schiavone, alluded to the noise problem by essentially saying it could cease someday without direct authority involvement if the financial reports hold true. "Things may take care of themselves," he said, adding, "$900 million is a tremendous loss for any company to sustain."
DHL Left Kentucky
Cincinnati/Northern Kentucky International Airport was once a DHL hub, operating with 1,800 employees and 10 times the number of planes as the Riverside operation. Then, DHL largely left in 2004. Now, the facility is used for storage and as a backup to DHL's Wilmington, Oh., hub. About 250 workers remain in the building DHL rents, airport spokesman Ted Bushelman said. The airport lost the landing fees it had been earning from DHL's daily flights and had to raise landing fees for all of the airport's airlines the next year. "It was a major hit," he said.
Commission Undeterred
Other members of the March Joint Powers Commission were less concerned by the analysts' opinions. "For DHL to pick up their bags and travel to their country is a business decision for them to make," Moreno Valley Mayor Charles White said. "It would appear to me that DHL has fully researched this before they came in here." Moreno Valley Councilman Richard Stewart, another commission member, said companies such as DHL expect to lose money for a certain amount of time when pitted against such formidable competitors as UPS and FedEx.
"I really think that there's such a wide range things of what could happen," he said. "If they did abandon ... what? Would they leave all of their yellow trucks in the parking lot?" Stewart said he is confident DHL has staying power at March Air Reserve Base but even the possibility that the company may leave could still bode well for the area because the facility could prove attractive to other shippers. "I feel pretty upbeat," he said. "It'd really be nice if we could find some operation that would intensify the daytime operations."
By the Numbers
$900 million
Amount DHL Express lost in the U.S. in 2007
About 350
People work at DHL's Riverside facility, which handles one international and seven domestic flights each night.
DHL will help create another
1,500 to 2,700 jobs in the area, according to estimates by DHL's landlord March GlobalPort
Sources: March JPA transcript, Morgan Stanley report and Bear Sterns report.
 

SkyMiles

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Supposedly cut total flights out of ILN to 80. That would mean a cut of 15 or so. That is the rumor in the hoot tonight.
 

shooter

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Don't worry about it is all I can say booger. There is nothing any person from ABX or Astar can do about it. No need for blood pressure spikes when we do all we can do. ABX provides a great product at a great price. If they don't know how to use that to sell the express product there are problems in other areas of DHL that have an impact on us. They don't seem to know what they are doing since all the customers are leaving and if they think that is a result of air network then I will fly over there myself and get in Klaus' face and tell him his boys are F'ed up. At that point I would already be part of the reduction or have another job so no skin off my teeth. I don't want another job, but DHL may force me into one.

It's the idiots like the ones on that exdhl.com that are screwing DHL up. Talking about stealing and skipping drops to get off "on time" or routing things around because they don't want to deal with it.. As a result of those idiots on the ground, we seem to take the hit on the air network. Just proves it is a whole team to get things done but we are the fall guys. They seem to be the weak link and yet they are kept around. Maybe they can stay until DHL is nothing but 1 drop box at JFK.
 

TWA

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One problem DHL has is they have no idea what kind of demand they actually have for the aircraft. All of the geniuses (I have no idea if i spelled that even close to right) in the sort could care less what happens to the boxes that come in, and just stick everything in containers because it's easier. If they could get them to actually palatize the ground freight and put it on trucks, then DHL (or someone) would actually know how many flights are required for the p1 freight.

It's a hard reality, but you don't make money with a plane full of boxes that are paying for ground service.
 

erichartmann

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One problem DHL has is they have no idea what kind of demand they actually have for the aircraft. All of the geniuses (I have no idea if i spelled that even close to right) in the sort could care less what happens to the boxes that come in, and just stick everything in containers because it's easier. If they could get them to actually palatize the ground freight and put it on trucks, then DHL (or someone) would actually know how many flights are required for the p1 freight.

It's a hard reality, but you don't make money with a plane full of boxes that are paying for ground service.

In general I agree with you but....

If you have empty space on the airplane it doesn't make sense to send the airplane and truck the ground freight. This has the potential to create other problems because if the customers realize you are flying their ground freight then they will ship ground with the expectation it will be flown. Also, if you have empty space you need to get your sales force to work.

Worst case is one station which has two inbound flights per day, but only enough freight to support one outbound with express. The second carries ground freight back to the hub, which saves the cost of operating the empty aircraft and the trucking. Still, this is not an acceptable solution for the long term.
 

countbat

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DHL USA made the mistake to use americans in management positions. Or anybody knows our management is incapable to manage but very capable to steal and destroy every company.
 

TWA

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In general I agree with you but....

If you have empty space on the airplane it doesn't make sense to send the airplane and truck the ground freight. This has the potential to create other problems because if the customers realize you are flying their ground freight then they will ship ground with the expectation it will be flown. Also, if you have empty space you need to get your sales force to work.

Worst case is one station which has two inbound flights per day, but only enough freight to support one outbound with express. The second carries ground freight back to the hub, which saves the cost of operating the empty aircraft and the trucking. Still, this is not an acceptable solution for the long term.

I agree with you completely. If there is extra room on the plane, then fill it with ground.

What I was mainly talking about though is stations with multiple flights inbound and outbound. With the current setup of the sort, no one really knows how many planes are actually needed for priority freight, just how many fill up on a nightly basis.

The other problem is whatever shows up at the sort first ends up on the plane first. Every night overnight shipments don't make it out of ILN because the people in the sort filled the flight with ground before all the p1 was in.

BTW, I regularly ship DHL out of Xenia and the hoot, and I have come to expect my ground shipments to be overnighted. Out of all the things I've sent, only one or two have actually gone ground. Why pay $45 for a box to get overnighted to California when I can pay $6 for the same service?
 

shooter

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Like the Polar 747 pilot posted on that other web site, "Seems ironic that it took about 24 hours to get there from Hong Kong and 5 days for the last 10 miles. “

I think the DHL air network has its problems but it is far from the reason DHL is in the position it now finds itself in. Stinkin' shame it may take the hit for a broken ground network.
 

TWA

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Don't get me wrong, I don't want to see anyone out on the streets, but it's the entire system that is broken.
 

erichartmann

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I agree with you completely. If there is extra room on the plane, then fill it with ground.

What I was mainly talking about though is stations with multiple flights inbound and outbound. With the current setup of the sort, no one really knows how many planes are actually needed for priority freight, just how many fill up on a nightly basis.

The other problem is whatever shows up at the sort first ends up on the plane first. Every night overnight shipments don't make it out of ILN because the people in the sort filled the flight with ground before all the p1 was in.

BTW, I regularly ship DHL out of Xenia and the hoot, and I have come to expect my ground shipments to be overnighted. Out of all the things I've sent, only one or two have actually gone ground. Why pay $45 for a box to get overnighted to California when I can pay $6 for the same service?

If what you say is true I'm appalled.

I'm reasonably sure ABX did not operate the sort in this fashion for Airborne. Airborne, and therefore ABX went to some lenghs to seperate the express (P1) from both the 2nd day (P2) and ground freight. This doesn't mean they didn't all fly on the same aircraft. They did, but as a rule P2 did not bump P1 and GND didn't bump P1 or P2.
 

FreightBumper

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DHL USA made the mistake to use americans in management positions. Or anybody knows our management is incapable to manage but very capable to steal and destroy every company.

What planet did you spin off of? Every US company is being destroyed? I thought UPS was doing ok as well as GE and a few others. Explain please.
 

TWA

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I just shipped three ground packages this afternoon, so I'll let everyone know what happens on Monday. One was only going to columbus, so that doesn't count, but one was going to Florida and the other to Mississippi. Come on overnight shipping!
 

shooter

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I just shipped three ground packages this afternoon, so I'll let everyone know what happens on Monday. One was only going to columbus, so that doesn't count, but one was going to Florida and the other to Mississippi. Come on overnight shipping!

Do you work for Astar or ABX?
 

TWA

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Do you work for Astar or ABX?

No sir, not at this time. I do work in the hoot and I do work in Aviation, but not with any of the DHL contractors.
 

shooter

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No sir, not at this time. I do work in the hoot and I do work in Aviation, but not with any of the DHL contractors.

You get a great rate for shipping is the reason I asked. Our option for shipping DHL sucks. You have to do it online and the rates.....did I mention the rates suck. Oh yea, we can't ship ground as an ABX employee.

So its a no brainer I am a regular at my local Post Office. When KILN was Airborne it was better service, better rates, and the people over in logistics were nice. So my money supports USPS, no sweat.
 

countbat

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What planet did you spin off of? Every US company is being destroyed? I thought UPS was doing ok as well as GE and a few others. Explain please.

Just because UPS, GE and few others are OK for now, it doesn't mean many athers were not screwed by bad management decisions. Eastern, PanAm, Emery, KHA and many others. I have a feeling companies such AA, UAL, NWA don't do very well with their management.
If you would have asked someone, the day before Enron going away how the company was doing, you might have gotten very surprising answers.
Look at management salaries and our country's economical situation.
Many companies are OK but the problem is too many companies don't do very well when with little better management the situation would be much better
 

TWA

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I find the DHL online tool pretty easy to use. The rates are good, they don't seem to care when I use the free supplies for ground shipments, and as I said before, almost guaranteed to be overnighted. Their billing department sucks, but that's another issue.
 

flyinboxes

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You cannot fly GROUND FREIGHT. The added weight and additional fuel burn means YOU WILL LOSE MONEY. This has been a huge thorn in DHL's side and they are going to fix it.
 

erichartmann

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You cannot fly GROUND FREIGHT. The added weight and additional fuel burn means YOU WILL LOSE MONEY. This has been a huge thorn in DHL's side and they are going to fix it.

Not necessairily so. Depends on what you are charging for both the ground and air, which determines your margins, and how much ground you are moving by air. It's called yield management. There is no doubt that moving ground by air will reduce your profit margin though, and if you do enough of it, you will lose money.

Also, if you are going to ferry an aircraft from A to B on a regular basis, you might as well put the ground on it rather than hire a truck to haul the ground from A to B, so long as the added fuel costs are less than the cost of hiring the truck. This is true of any ground freight you have so long as the airplane is going to fly anyway.

This does not mean this is a good way to run the business. It would be far better to find a way to move the inbound freight to A without having to ferry the empty aircraft back to B. Perhaps sell some additional customers on the air side, or increase the ground freight to the point where trucking it makes sense. Neither will happen overnight (no pun intended) and service reliability must increase for either to occur.
 

TWA

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A few years ago when Fedex was just starting to offer ground service, most of the stuff going to and from the west coast was flown. This was because on the wast coast they did not have an effective ground network in place. With in 1 year, they trucks were in place and the freight was trucked.

The difference between the Fedex and DHL situations is for Fedex it was a temporary solution while the network was being built. For DHL it is standard practice with no real evidence of a real ground network being built.
 
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