flythemed

Astar Air Cargo, formally DHL Airways, once had what many thought to be one of the best scope clauses in the industry. Now we are merely an ACMI carrier for Deutsche Post/DHL, even though DHL owns 49% of us. We are only one of many different airlines like ABX, Atlas, Polar, Northwest Cargo, Lufthansa, European AIr Transport, Blue Dart and a myriad of other carriers too numerous to mention. Of recent interest is the joint venture between DHL and Lutfthansa to form a new airline, AeroLogic, which will have 10 brand new B777F by 2010. As the Mananaging Director of Aerologic Thomas Puisch said their aircraft will fly "a network which includes major Asian cities, including destinations accross the North America." Also, while transiting customs at DHL Airpark in Wilmington OH, I had a brief conversation with a Lufthansa pilot who said DHL and Lufthansa have another airline in China that will grow to operating 5 new B747F aircraft.

What might be infered from how DHL/Deutsche Post currently operate their freight business is to use multiple carriers to ensure they can pit one carrier against the other, one pilot group against the other, ensuring that there will always be adequate overlap, so that DHL product will move at the lowest cost possible. It may be difficult for one pilot group to ever have the required leverage to conduct a job action or a strike of any kind, when DHL/Deutsche Post could easily just pick up the phone and have another company fly that freight to its final destination?

Independent Contractors, whether in the corporate world or the aviation world is the model that many companies are embracing to cut cost and gain profit share. DHL has shown that they are masters of this strategy. Deutsche Post last year made nearly 7 billion US dollars and invested huge sums of money in purchasing new aircraft for their world wide operations. It is interesting that DHL is unwilling to help modernize its fleet in the United States because, as they say, refleeting cost is a major factor. After 10 years of paying UPS 1 billion dollars per year and adding an additional 2 billion dollars to cover various severence and payback expenses, that 12 billion dollars might be invested in a way that would allow DHL to actually remain a competitor with UPS rather then being at the mercy of UPS negotiators in 10 years time. 12 billion could ensure that DHL could have a very fuel efficient airline that regains its major focus on international freight, where approximately 40% of all DHL product transits the United States, for many years past 2019.

Who knows the inner workings of the proposed DHL-UPS agreement? It is interesting that if it is 'simply a vendor relationship' that poses absolutely no anti-trust or anti-competitive questions or concerns, then why has it taken so long to sign when the projectied contract date was to be August 31st 2008? Why wouldn't both DHL and UPS willingly agree to let the proposed contract be reviewed by the FTC and the DOJ to ensure that everything is in compliance with the law, before implementaion of that contract? Why have both the Chairman of the Judiciary and Chairman of the Transportation and Infrastructure both stated that further hearings into the DHL-UPS proposal are necessary because of the 'mysterious' nature and the multitude of questions that surround this proposal remain unanswered? If these three mega companies, DHL-UPS-Deutsche Post are so determined to make this deal fly, regardless of the political and legal storms that exist, perhaps there is something more that each wants to achieve. What are the chances, that after a few short years, DHL/Deutsche Post and UPS decide to move into an undeclared phase two of their agreement that somehow slipped under the radar screen?

Perhaps DHL-Deutsche Post with its huge network of ACMI carrriers and Independent Contractors would begin to fly brown boxes from and into the United States and throughout the world. All planes, Brown topped with Yellow in the US and Yellow topped with Brown outside the US/Mexico/Canada, would be full, even during a worldwide economic downturn. If that 1 billion dollars per year is never really paid to UPS but is exchanged for flying 1 billion dollars per year of UPS freight overseas, might that not be perhaps the ultimate corporate quid pro quo?


No one can portend the future, so who reallly knows? Regardless of how this deal turns out or the ramifications thereof, I wish the all those pilots who fly for the Brown, the Purple, the Gray and all the folks at Astar, the best.

J Dawg

Probably because since the deal was announced and now, the US and World economy has totally nose-dived, and DHL no longer wants a domestic US network at the cost of $1 billion/yr, and therefore has begun to pull out, negating a need for that $1 billion/yr with UPS

Welcome To Air Cargo World -- Breaking News

DHL Steps Up Cutbacks
DHL Express is cutting back its U.S. operations more deeply than earlier announced as it copes with a troubled American economy.
DHL also says it is speeding up the cutbacks it had been planning, putting its cost-saving efforts on a more urgent track and prompting suggestions from some industry observers that even greater cuts in DHL's presence in the United States are on the way.
Jon Langenfeld, an investment analyst with Baird Equity Research, said his firm's industry contacts "suggest that deteriorating conditions could force DHL to more drastically eliminate its U.S. domestric parcel operations."
DHL late Friday issued a statement saying the company has "identified additional rationalization measures" to support its overall restructuring and that it has "hastened the pace of many of our cost savings initiatives."
The company says the efforts are aimed at "sustaining DHL's business in the U.S. market and stem our ongoing losses"
A key part of the restructuring effort has not gone forward, however. DHL said in May in announcing the restructuring that it would outsource its flight services in the United States to UPS and hoped to have a 10-year contract for the business completed by the end of August. DHL officials did not respond to questions about the contract talk; UPS officials said the talks were still going on.
DHL recently trimmed some of its service offerings, dropping the DHL@home hybrid postal/private delivery option that had been launched by Airborne Express several years ago.

Skymaster

That is in reference to the ground domestic operation (trucking), the cheap stuff DHL never has made any money on. DHL is still keeping the International Air market in the US which has always been highly profitable to them.

J Dawg

Yes, and what I was referring to is the domestic air market, which they want to shift to UPS. If DHL is reducing in this area (they've already lost many customers), then the size and scope of the UPS deal might be reduced as well. Just speculation, but perhaps this is what is being ironed out.