Wednesday, March 26, 2003

Fate of DHL Airways up in the air

It could go out of business, or be gobbled up

By James Pilcher
The Cincinnati Enquirer

DHL Worldwide Express and Airborne Express executives Tuesday could not say for sure what would happen to their two hubs in the area, and they also could not answer another question: What should they do with the services of two airlines doing the same job?

As part of Monday's $1.05 billion acquisition of Airborne's ground assets by DHL, Airborne's subsidiary airline ABX Air Inc. becomes a separate entity with its own stock.

But company officials would not say what their long-term plans are for DHL Airways, the Erlanger-based airline that carries domestic and some international freight for DHL out of that company's hub at the Cincinnati/Northern Kentucky International Airport.

Brussels-based DHL has minority ownership of that airline, which includes 36 planes and 489 pilots. ABX Air has 110 planes and charters another 62. In addition, that airline flies in and out of a private airport in Wilmington. Under the new deal, that company would then contract to DHL to carry air freight as well.

Carl Donaway, chairman and chief executive officer of Airborne Express, who will become the CEO of the new company in the U.S., said the two airlines would continue to operate as they have been until the deal is consummated. He would not comment on what would happen after that, saying only that all aspects of the two companies would be part of an integration review.

Several analysts said it would be logical to merge the two carriers or to dissolve DHL Airways.

"They're not going to deal with two airlines to do the same job," said David Campbell, air freight analyst with the Richmond, Va., brokerage firm Thompson Davis and Co. "DHL Airways will probably go out of business or be gobbled up."

DHL Airways is about to open contract negotiations with its pilots union; the contract becomes open for renewal Tuesday.

John Fellows, DHL's chief operating officer for the Americas, said the current contract allows DHL to use other airlines to carry its freight as part of a growth strategy, meaning it could start working with ABX Air.

But officials with DHL Airways' branch of the Air Line Pilots Association disputed that.

"We have a section in our contract that guarantees us some job security," said Jim Bonney, chairman of the local union. "If we feel that is being violated, we will take steps to assert our rights under that section."


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