Traffic World: DHL Restructures, Outsources to UPS

May 28, 2008: DHL unveiled a far-reaching restructuring of its troubled U.S. express business Wednesday that includes a sharp pullback in its operations and outsourcing its air transport business to competitor UPS.

John Allan, chief financial officer of DHL parent Deutsche Post World Net, called the moves "radical and decisive actions" but said it will still leave DHL losing $3 billion between 2008 and 2011.

DHL said it will eliminate about 34 percent of its stations in the United States by consolidating some stations in various cities and shutting others in remote locations, leaving the carrier with a smaller operation in the country while maintaining a "strong presence." The cutbacks, the company said, would have a "very minimal" impact on customers, affecting only a small percentage of pickups and deliveries as DHL uses the U.S. Postal Service for some of its remote pickup and delivery operations.

"The impacted number of shipments is below 4 percent," said DPWN Chairman Frank Appel.

The larger change will be in air operations, where DHL said it will phase out its outsourced flying with ABX Air and ASTAR Air Cargo and turn that business over to UPS. DHL said it is negotiating a 10-year contract for the airport-to-airport transportation with UPS but expected to pay its competitor some $1 billion a year for the aviation services.

The actions scale back the strong push DHL made in the United States in recent years, capped by the purchase in 2003 of Airborne Express, then the country's No. 3 express carrier. Publicly traded DPWN has been under growing pressure to pull back or even withdraw from the United States in the face of hundreds of millions of dollars in losses.

Deutsche Post would not detail its total losses in the United States, but the company projects $1.3 billion in operating losses in 2008, $900 million next and continuing losses at least through 2011.

Taken from Traffic World.
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