ERLANGER — Long the leader in worldwide air freight but a minor player domestically, DHL is about to jump headfirst into the suddenly soft American market.

        And the Tristate will be the company's springboard.

        The new chairman and chief executive officer of DHL Airways - a subsidiary of DHL Worldwide Express — says the airline expects to grow along with the company's new hub and sort facility nearing completion at DHL's lone lone U.S. center located at the Cincinnnati/Northern Kentucky International Airport.

        “The U.S. market is 40 percent of the world market, and while DHL has been successful worldwide, you can't keep that up without a piece of the U.S. market,” said Joe O'Gorman, 57, who was named to the position in late March, having formerly run air operations for United Airlines and run several smaller passenger airlines.

        “Obviously, the object is a piece of that (market), and DHL wouldn't be constructing this hub that is going to give us three times the capacity if they didn't believe that it was possible.”

        Said Mr. O'Gorman: “I don't have a lot of experience in freight, but this is an airline, first and foremost. And we want to grow both businesses (airline and freight company) and be a presence in the marketplace.”

Room for more planes
        The $170 million facility is due to open in June 2002. It will triple the company's package-handling capacity, while enabling almost double the number of planes to be loaded and unloaded. Kentucky has contributed $17 million to build runway ramps to the facility.

        The expansion plans also include adding planes. According to Air Inc., an airline pilot placement firm, DHL Airways has orders for two Boeing 727s to be received by the end of the month. DHL officials wouldn't confirm that.

        Erlanger-based DHL Airways has 33 jets, but the new 200-acre facility and tarmac area could handle up to 62 planes.

Distant third in U.S.

        DHL Worldwide Express, based in Brussels, Belgium, with U.S. headquarters in San Francisco, recorded nearly $5.6 billion in revenue worldwide in 2000. That's a 21 percent jump from the previous year. That included $1.23 billion domestically, 12 percent more than in 1999. Saying DHL was a private firm, company officials declined to provide any additional data.

        According to Dan Moyer, analyst for the firm Air Cargo Management Group, DHL has about 37 percent of the world's air freight market. But domestically, the company has less than 1 percent of the market. Federal Express has a 44.5 percent U.S. market share, followed by United Parcel Service with 31.6 percent.

        But lately, overall sales have been slipping in the air freight market, as companies looking to cut costs use e-mail or less expensive ground freight, said Mr. Moyer.

        “The entire U.S. industry has had little or negative growth — and DHL is definitely expanding its capacity,” Mr. Moyer said. “That means their domestic position could skyrocket when the U.S. economy rebounds.”

        Mr. Moyer said DHL's planned growth could also shore up its sagging international business. In 1997, DHL owned 39.9 percent of the world market — through the middle of 2000, that number was down to 37 percent.

Rivals complain

        One potential roadblock had been domestic opposition to DHL's ownership structure. Deutsche Post, the company that runs Germany's postal service, owns 23 percent of DHL International. As a result, and Federal Express and UPS both complained to the U.S. Department of Transportation that the set-up is unfair and that DHL could use the resources of Deutsche Post to monopolize the market.

        They also complained that DHL Airways is a “dummy” company, actually operated by foreign interests against U.S. law.

        But Friday, transportation officials denied the petitions, but said they would continue to review the case.

        “We are an independent company that happens to have one major customer (DHL Worldwide Express),” Mr. O'Gorman said. “And as for the other complaints, they are entirely baseless.”

        Company officials plan to spin DHL Airways off into a separately-owned company, but would not give specifics on when it might happen.

        In addition, DHL Airways recently reshaped its ownership structure to include 55 percent domestic ownership with a 75 voting share, Mr. O'Gorman said.

        Even with the challenges, the company will be growing, Mr. O'Gorman said.

        “But what we're going to do is not dissimilar to what Southwest Airlines did in the passenger side,” he said. “They attacked a little niche and made it their own. Making inroads into the competitors' business is going to take some doing, but why not try?”

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