UPS: No 'significant' cargo flights from DHL until 2009
UPS: No 'significant' cargo flights from DHL until 2009
UPS says it needs an agreement first then work can begin on a new operational plan for Wilmington hub.
By John Nolan
Staff Writer
Sunday, August 03, 2008
One of the big questions about DHL's proposal to hire United Parcel Service to fly its express delivery packages nationwide is how soon it will start taking away jobs from Wilmington, from where the ABX Air and ASTAR Air Cargo airlines now fly DHL's U.S. cargo.
Ohio officials estimate that a DHL shift to UPS will cost at least 8,000 jobs at DHL's Wilmington air freight hub, a major regional employer. A UPS spokesman said it could be "well into next year" before any changes are noticeable.
DHL said on May 28 that it hoped to work out a contract with UPS within three months and to start making changes in DHL's delivery network beginning later this year.
But that timetable may be unrealistic, because of the complexities of negotiating a deal and putting it into effect, UPS spokesman Norman Black said. UPS is unlikely to begin flying significant amounts of DHL cargo until well into 2009, Black said in a telephone interview last week from his Atlanta office.
"Bottom line is, we expect to be able to negotiate an agreement by the end of this year," Black said. "We, as a vendor, can't build a new operational plan for them until we've got an agreement, until they share information with us about their network and their package flows."
Lt. Gov. Lee Fisher said DHL hasn't given Ohio any new information about the timetable for the proposed deal with UPS.
Fisher made a personal visit to the U.S. Department of Justice in Washington on July 10 to explain Ohio's position that a DHL deal with its rival UPS would reduce competition in the U.S. express delivery market and potentially violate antitrust laws designed to promote competitive markets. If regulators agree, the federal government could join Ohio in a possible antitrust lawsuit against DHL, or Ohio could go it alone under the state's own antitrust law, Fisher said.
Fisher said Justice Department officials told him they had started collecting information about the proposed DHL-UPS deal, but could not start any antitrust investigation until DHL and UPS have a deal in place.
"We are being relentless in our efforts to explore how we can stop this transaction, on multiple fronts," Fisher said.
Ohio would be willing to work with DHL on ways to help reduce its operating costs, but only if the company backs away from the UPS deal and commits to staying in Wilmington, Fisher said. DHL has said it is committed to a deal with UPS.
With the Bush administration scheduled to relinquish power in January 2009, Ohio officials have covered their bases by also bringing their concerns about DHL and the Wilmington jobs to the attention of both major-party presidential candidates, Fisher said. Republican John McCain plans to go to Wilmington in early August for a campaign trip to DHL. Democrat Barack Obama recently met with Wilmington's mayor and workers at DHL.
Ohio has also asked the U.S. Department of Transportation to consider using its authority, independent of an antitrust case, to stop the proposed UPS-DHL deal on grounds it would have negative effect on the U.S. shipping market. Ohio is awaiting responses from both federal agencies.
DHL and UPS say there is no antitrust issue and no need for any government approval. They say it would be a customer-vendor arrangement, similar to DHL's current contracts under which ABX Air and ASTAR Air Cargo fly DHL packages nightly from Wilmington. Replacing ABX and ASTAR with UPS would shift the cargo sorting and flying work to UPS' hub at Louisville, Ky.
DHL projects a $1 billion loss on its U.S. cargo operations this year, but says it needs to continue operating in the United States as a key part of its global delivery network. DHL has forecast that hiring UPS would reduce DHL's U.S. losses to $900 million in 2009, $500 million in 2010 and $300 million in 2011.
DHL said it would also save money by reducing its U.S. delivery network capacity.
"The purpose of our restructuring plan is to build a stronger foundation for sustained operations in the U.S.," Jonathan Baker, a DHL public relations representative, wrote in an e-mailed answer to a reporter's questions. "To do this, a new operating model is required — one that is better matched to the current economy and existing volumes.
"Both rising fuel prices and the downturn in the U.S. economy have had a significant impact on our operations and on the nature and timing of our restructuring plans," Baker wrote.
Ohio's support for DHL in Wilmington
Here is Ohio's accounting of its direct funding contributions in recent years to support expansion and improvements at DHL's Wilmington air freight hub:
Job retention tax credit, valued at $66 million.
Job creation tax credit, 90 percent for five years and 70 percent for 10 years, valued at $13 million.
Rapid outreach grant, up to $2 million.
Training grant, up to $2 million.
Road improvement grant, $1 million.
Dayton-Montgomery County Port Authority sold $270 million in bonds in support of the hub improvement.
The Ohio Department of Transportation is building a $99 million highway bypass project designed to support regional economic department. The project's initial emphasis was DHL's needs, but the state says the new route is still needed to reduce truck traffic through Wilmington and noise in residential neighborhoods. Construction is to be complete by early 2011.
Source: Ohio Department of Development
Contact this reporter at (937) 225-2242 or
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