Advertising

Friday, August 15, 2003 - Page updated at 12:00 AM

E-mail article     Print

Airborne Express shareholders OK sale to DHL

Seattle Times staff reporter

Shareholders of Airborne Express, as expected, approved the sale of its truck-delivery network to DHL Express, a shipping company owned by Germany's postal service.

What's not known is what the billion-dollar deal, which is expected to close today, will mean for the company's operations here. About 1,200 of Airborne's 22,000 workers are in Seattle.

DHL is based in Fort Lauderdale, Fla., and has its main airport hub in Cincinnati, Ohio. Airborne's main hub is in Wilmington, Ohio. With two headquarters and two hubs, the merged company will now examine which to keep.

"No plans or decisions have been made yet about future headquarters and management," said Wolfgang Pordzik, president for U.S. operations of Deutsche Post, the German postal service. "Now that the merger is approved, a joint management team will go to work to execute the integration."

Carl Donaway, Airborne's chief executive and president, becomes chief executive of the new company. But as for other managers, "no decisions have been made yet," Pordzik said.

Local politicians are concerned that Airborne is re-examining its presence in Seattle. Mayor Greg Nickels contacted Donaway several months ago expressing the city's desire to have Airborne stay.

"If there is a desire at Airborne to expand, the city would support that with helping find space to do so," said Jill Nishi, director of Seattle's Office for Economic Development.

However, in the case of Airborne, there is not much the city can offer. The takeover is part of DHL's expansion strategy to become the third global player in the shipping market, currently dominated by UPS and FedEx.

"This certainly limits what the city of Seattle can offer," said Steve Leahy, chairman of the Greater Seattle Chamber of Commerce. "This is not about bargaining for tax cuts or local favors but about DHL growing."

Airborne created its ground unit to deliver packages by trucks in April 2001 as companies shifted away from expensive air shipments. Airborne's second-quarter profit this year rose eightfold to $3.8 million as parcels sent by truck jumped 73 percent. Average daily U.S. shipments by air fell 7.5 percent.

Airborne "wasn't really going to grow their business incredibly fast as a standalone," Arthur Hatfield, a Morgan Keegan & Co. analyst, told Bloomberg News. "They were going to have to grow internationally, and that was going to be expensive."

DHL offered $21.25 a share for Airborne in March. The stock closed at $22.89 a share yesterday. DHL is owned by Deutsche Post, which is owned partly by the German government and partly publicly traded in Germany.

Airborne's planes will be spun off into an independent company, ABX Air, owned by Airborne's current shareholders. However, it will continue to serve DHL Worldwide Express. ABX stock will be traded over the counter. ABX Air's annual revenue is expected to be $1 billion. Most of ABX Air's employees work in Wilmington, Ohio.

The complicated structure of the sale was necessary to show the Department of Transportation (DOT) that ABX Air will remain a domestic company. U.S. law prohibits foreign control of airlines. However, DOT approval was not a condition of the sale.

DOT is investigating a parallel case whether DHL's own airline, which has been renamed Astar Air Cargo, should be grounded by request of FedEx and UPS who argue that it is controlled by DHL.

Industry observers expect that UPS and FedEx also will challenge ABX Air, arguing that it is not an independent airline since it will continue to mainly serve DHL World Net.

Sigrid Aufterbeck: 206-464-2263 or saufterbeck@seattletimes.com. This report includes information from Bloomberg News.

Copyright © 2003 The Seattle Times Company

advertising


Get home delivery today!

Advertising

Advertising