Gemini Cargo

[erichartmann]

ABX Air is operating under a contract that was negotiated before they became an ACMI carrier. The only reason DHL spun them off was to weaken the unions position in future contract negotiations.

ABX may not be a "bottom feeder" in the traditional sense of the word, but they're certainly competing with bottom feeders for business. How many "heavies" are being operated out of ILN and throughout the world by companies other than ABX/Astar?

How many airplanes does ABX have parked? How many guys does do they have on the street?

When was the last time either ABX or Astar did any significant hiring/upgrades?

The Fat Lady is in voice, and preparing to make her entrance...

DPWN/DHL spun off ABX because they could not own more than 25% of the voting rights and 49% of the equity of a US carrier. They spun off the former DHL Airways (now Astar) for the same reason. They did not retain any portion of either carrier because they knew the carriers faced attacks on their citizenship (therefore their rights to an operating certificate) from Fedex and UPS. From a defensive perspective it was better to have no relationship with either carrier other than the ACMI.

 

[AgreenFO]

it's amazing how these post get so far off beat, I just asked about Gemini...but I guess all the extra info is cool too

 

[erichartmann]

it's amazing how these post get so far off beat, I just asked about Gemini...but I guess all the extra info is cool too

I suppose. Just couldn't stand by and see bad info posted as fact.

The "only" reason was really bad info. :smash:

It may have suited DPWN/DHL to have the two airlines seperate and fighting for the work, but it was not the "only" reason.

 

[Whistlin' Dan]

It may have suited DPWN/DHL to have the two airlines seperate and fighting for the work, but it was not the "only" reason.

I'll take your word for it, as your info is probably more timely than mine. But perhaps you can explain something for me? Assuming that it was in DHL's best financial interests to have one company flying their work, what would have prevented them from selling DHL Airways to ABX Air as a condition of purchasing ABX's ground network? That would have given them the "One Airline" that the pilots think makes so much sense, and any lingering questions of U.S. ownership would have already been answered. It seems like it would have been a mutually beneficial deal for both carriers.

I never understood why UPS/FedEx pressed the issue of U.S. ownership upon DPWN/DHL, and neither have some people fairly high up the food chain in the overnight express business that I've talked to. Maybe there's some big "Master Plan" up there. Or maybe it was a really dumb idea, and some senior planners at UPS/FedEx have had their career aspirations derailed as a result of forcing this issue. Whatever the origin, one thing is for certain...allowing DHL to use ACMI carriers to operate scheduled, dedicated lift over the long-term has assured them a virtually strike-free labor force at what will surely become cut-rate wages.

 

[xspud]

Assuming that it was in DHL's best financial interests to have one company flying their work, what would have prevented them from selling DHL Airways to ABX Air as a condition of purchasing ABX's ground network?

I never understood why UPS/FedEx pressed the issue of U.S. ownership upon DPWN/DHL, and neither have some people fairly high up the food chain in the overnight express business that I've talked to.

I hate to cut in on a "Gemini" thread, but maybe it's legit, since Gemini stills does some DHL flying, I assume.

RE: the "one airline". I think this has been discussed elsewhere, but my understanding is that there was a merger planned at the time of the buyout. There are many theories out there as to why it didn't happen. I personally believe that the "foreign ownership" issue was one factor. That didn't help a merger because of the need to avoid any appearance of "control". But I think the merger didn't happen primarily because of financial issues and power plays among execs.

From the results we've seen in ILN, I can easily believe that DHL would have preferred one primary carrier serving domestic U.S. out of ILN. I have no illusions about growth (whether merged or not). We know that instead of growing existing carriers DHL typically signs up another ACMI when they need additional lift. I think it's possible that this pattern could change as they face increasing global competition from UPS/FedEx (especially in Asia). From what I've seen in the U.S., the ACMI operated express model is not competitive in either service or price.

Speaking of UPS/FedEx, I believe their objection to DHL's citizenship was two-fold. Just as JB and others have fought Virgin's entry into the U.S., why not "use all your resources" and use the government to put roadblocks in the way of the competition? Even more important, I think that UPS/FedEx wanted (and still want) to use the issue as a lever to gain more access in Europe. It's a political bargaining chip in the current EU/US "open skies" discussion. For example, shortly after objecting to DHL's "citizenship", UPS' CEO spoke in Europe and argued for more U.S. access to European markets.

 

[Whistlin' Dan]

From the results we've seen in ILN, I can easily believe that DHL would have preferred one primary carrier serving domestic U.S. out of ILN. I have no illusions about growth (whether merged or not). We know that instead of growing existing carriers DHL typically signs up another ACMI when they need additional lift. I think it's possible that this pattern could change as they face increasing global competition from UPS/FedEx (especially in Asia). From what I've seen in the U.S., the ACMI operated express model is not competitive in either service or price.

Again, your information is better than mine. I was under the impression that the on-time performance from both airline groups in ILN was quite good, and that whatever delays were occuring were as a result of other influences and the merger itself. Also, do you have any idea how many ACMI carriers are hauling for DHL in Europe, or why they haven't integrated their operations over there?

Speaking of UPS/FedEx, I believe their objection to DHL's citizenship was two-fold. Just as JB and others have fought Virgin's entry into the U.S., why not "use all your resources" and use the government to put roadblocks in the way of the competition? Even more important, I think that UPS/FedEx wanted (and still want) to use the issue as a lever to gain more access in Europe. It's a political bargaining chip in the current EU/US "open skies" discussion. For example, shortly after objecting to DHL's "citizenship", UPS' CEO spoke in Europe and argued for more U.S. access to European markets.

This is where I'm having trouble connecting the dots. If UPS wanted "more access to European markets" wouldn't it make more sense for them to ask for that after NOT opposing Deutsch Post's ownership of DHL Airways? Somehow, it doesn't seem like a very good idea to ask for more access to their markets after trying to block DP from ours. And why sell the entire airline? Why not sell 51%, and assign proxies to the majority stockholders?

DHL wanted a divorce from Airways, that's why. Not "seperate beds" or "seperate bedrooms," but a D-I-V-O-R-C-E. As has been pointed out, they're already "dating other people" in the form of Polar, Gemini, etc. From this point on, the Christmas gifts that Astar (and ABX) get from their "ex-" are going to get smaller and smaller and smaller...

As for "using all your resources to put roadblocks in the way of your competition" I would think that among the questions any business leader or military commander asks before initiating a campaign, the first might be "how much chance does my plan have of succeeding?" In this case, it was very little, as DHL was quite capable (and willing) to spin-off the airline to U.S. owners.

The next question is, "Where does it leave me if my plan fails?" Here again, game-theory seems to have eluded UPS management, as DHL now has the significant advantage in labor costs and stability that I alluded to in my previous post.

Of all the ways UPS and FedEx might chosen to slow DHL's growth in the U.S. market, "forcing" them to divest themselves of an expensive and potentially problematic workforce seems like one of the least-inspired.

 

[xspud]

Sorry, "Gemini" readers, I'm trying to stop but I just can't help myself!

I was under the impression that the on-time performance from both airline groups in ILN was quite good, and that whatever delays were occuring were as a result of other influences and the merger itself.

I think that on-time performance of ABX/Astar is good, but I have no idea how it compares to UPS/FedEx. I do know that after the ILN consolidation we adjusted departure and arrival times to arrive in ILN earlier and depart ILN later, resulting in less time to make pick ups and deliveries. My perception is that UPS/FedEx often depart outstations later and arrive earlier than we do.

The service and cost problem I'm thinking of involves more than the airlines. DHL has a conglomeration of ACMI's, belly and pallet space agreements, trucks, delivery contractors, etc. My impression is that this "system" does not deliver the same consistency and flexibility that the competition does. I don't have hard evidence, this is just based on anecdotal evidence "on the street", listening to loaders, supervisors, sales people and customers; also by observing our seemingly smaller loads. I think there's less efficiency and flexibility running 2 airlines instead of 1 out of ILN, but DHL's major U.S problem may be the ground side rather than the air side (Not having a "critical mass" ground delivery system which feeds the express sales to corporate accounts).

I did a little shopping on the DHL and UPS websites recently. Comparing shipping times and price, UPS generally cost less for comparable service or offered earlier delivery times for the same money. I know the corporate customer is getting a better deal than the retail customer, but that is true for UPS as well. Comparing apples to apples, DHL does not offer better service or a better price. I don't think that bringing more or cheaper ACMI's into ILN is going to do anything to help close that gap, in fact I believe it will make it more difficult for them to offer a truly competitive product.

Also, do you have any idea how many ACMI carriers are hauling for DHL in Europe, or why they haven't integrated their operations over there?

I don't know how many carriers DHL uses in Europe. I've been curious about that from the beginning but, like all things DHL, getting hard information is very difficult. I know that they own European Air Transport (serving Brussels and possibly the new hub at Leipzig). They also own DHL UK which serves East Midlands. Various long-haul routes are contracted to Lufthansa, Gemini, Kalitta, etc. I just read they are getting space on TNT's 747 to the UAE. So they seem to have one primary carrier serving each hub with contractors providing long-haul. As far as combining the owned carriers, normally DHL doesn't grow or combine any individual carrier, as far as I can tell.

This is where I'm having trouble connecting the dots. If UPS wanted "more access to European markets" wouldn't it make more sense for them to ask for that after NOT opposing Deutsch Post's ownership of DHL Airways?

That makes more sense to me, too, but that's not what UPS did. They opposed DHL's citizenship and then spoke in favor of more U.S. access to Europe. Politics and business as usual, I guess.

And why sell the entire airline? Why not sell 51%, and assign proxies to the majority stockholders?

As far as I know, DP never owned more than 49% of DHL Airways?

As has been pointed out, they're already "dating other people" in the form of Polar, Gemini, etc. From this point on, the Christmas gifts that Astar (and ABX) get from their "ex-" are going to get smaller and smaller and smaller...

As above and previously, DHL's model has never been to grow any existing carrier in the system, whether owned or ACMI. If they need additional lift they sign up, acquire or create another existing carrier. So I don't expect Polar or others to grow much beyond the original agreement as a designed result of DHL. Now, all of the carriers can certainly go out and acquire aircraft and compete for more DHL business, but it doesn't appear to me that DHL "gifts" anyone, whether ABX, Astar or any of the other players. But, as I've said, I think that business model may have to change if DHL is going to compete successfully in the global market. It doesn't appear to me that the current system has given them any competitive advantages that they are able to capitalize on.

It will be interesting to observe developments in the Asian market. DHL was first on the scene and it has been a stronghold for them. UPS is moving into Asia in a big way. If they make major inroads, it could force some new thinking in Bonn.

 

[metrodriver]

Gemini does not fly for DHL anymore to europe. That contract went to World. Gemini operates one flight for DHL out of europe to africa, which used to be done by Das Air untill that company (temporarely) lost the right to fly into europe

 

[Whistlin' Dan]

Sorry, "Gemini" readers, I'm trying to stop but I just can't help myself!

That's OK. Everybody knows that Gemini pilots won't start to read anything they can't finish by the time they're through taking their "Top-O'-the-Mornin'!" d**p anyway.

Thanks for the info...

 

[erichartmann]

Again, your information is better than mine. I was under the impression that the on-time performance from both airline groups in ILN was quite good, and that whatever delays were occuring were as a result of other influences and the merger itself. Also, do you have any idea how many ACMI carriers are hauling for DHL in Europe, or why they haven't integrated their operations over there?

This is where I'm having trouble connecting the dots. If UPS wanted "more access to European markets" wouldn't it make more sense for them to ask for that after NOT opposing Deutsch Post's ownership of DHL Airways? Somehow, it doesn't seem like a very good idea to ask for more access to their markets after trying to block DP from ours. And why sell the entire airline? Why not sell 51%, and assign proxies to the majority stockholders?

DHL wanted a divorce from Airways, that's why. Not "seperate beds" or "seperate bedrooms," but a D-I-V-O-R-C-E. As has been pointed out, they're already "dating other people" in the form of Polar, Gemini, etc. From this point on, the Christmas gifts that Astar (and ABX) get from their "ex-" are going to get smaller and smaller and smaller...

As for "using all your resources to put roadblocks in the way of your competition" I would think that among the questions any business leader or military commander asks before initiating a campaign, the first might be "how much chance does my plan have of succeeding?" In this case, it was very little, as DHL was quite capable (and willing) to spin-off the airline to U.S. owners.

The next question is, "Where does it leave me if my plan fails?" Here again, game-theory seems to have eluded UPS management, as DHL now has the significant advantage in labor costs and stability that I alluded to in my previous post.

Of all the ways UPS and FedEx might chosen to slow DHL's growth in the U.S. market, "forcing" them to divest themselves of an expensive and potentially problematic workforce seems like one of the least-inspired.

I think the citizenship review came down to someone deciding they would be better off if it worked, and no worse off if it did not. This was a second go around. The first time they forced a review DOT did an informal in house job. This time they got Ted Stevens to attach a rider to bill which required the DOT to do a completely new review with an ALJ.

I suspect the one of the reasons Astar got spun off completely was to negate the scope clause. I also think the reason Dasburg was not allowed to buy ABX at $.40 share was because Carl Donaway, Brazier, Cline were going to wind up with a fair number of ABX shares once the deal went through. They wanted the stock on the public market so it could go up and they could cash in. That was part of the deal. Remember, DHL and Airborne talked merger at least 4 times prior to this deal. In the end I think the previous talks failed becasue the big boys couldn't agree on money.... as in how much the payout would be to Brazier, Cline & Co.

 

[erichartmann]

As above and previously, DHL's model has never been to grow any existing carrier in the system, whether owned or ACMI. If they need additional lift they sign up, acquire or create another existing carrier.

Unnnhhh.... How does one "create" an existing carrier?

 

[xspud]

Unnnhhh.... How does one "create" an existing carrier?

Oops, good point, Eric. Probably should have just said, "...sign up or acquire an existing carrier." I meant to say something like, "or create another" and I was thinking of Jade Air Cargo. Probably should just leave that example out, because I'm not sure how directly involved DP/DHL actually was in the start-up of Jade.

 

[30West]

That's OK. Everybody knows that Gemini pilots won't start to read anything they can't finish by the time they're through taking their "Top-O'-the-Mornin'!" d**p anyway.

Thanks for the info...

Huh?..

 

[erichartmann]

Oops, good point, Eric. Probably should have just said, "...sign up or acquire an existing carrier." I meant to say something like, "or create another" and I was thinking of Jade Air Cargo. Probably should just leave that example out, because I'm not sure how directly involved DP/DHL actually was in the start-up of Jade.

I knew what you meant xspud, just couldn't resist a quick tug on the chain. :beer:

 

[Fedora]

Hey 30West! How yu doin?
I miss you guys, man!
Hope all is well with you and yours!