DHL recovers after quitting US domestic delivery, thanks to Dell and Amazon

THE DHL Express focus on international shipments in the US rather than domestic deliveries has paid off, with volume reaching 15,000 packages a day helped by key Dell Inc computer and Amazon book deliveries.


According to the International Air Transport Association (IATA), US trade routes account for more cargo volume than pre-recession levels in bellyholds of passenger aircraft and is forecast to make US$68 billion for fiscal 2011.


DHL Express, a Deutsche Post unit, has turned around its ill-fated decision to enter the US domestic express market and challenge United Parcel Service (UPS) and FedEx creating a rate war that led to restructuring in 2008 at a cost of EUR7.5 billion (US$9.6 billion).


Its acquisition of Seattle-based Airborne Inc to gain an established US network and fleet was a "disaster", conceded Deutsche Post CEO Frank Appel, as the company failed to claw away market share from entrenched UPS and FedEx, which held at 82 per cent against DHL's five per cent.


But its US customer base for foreign shipments came to 40 per cent so its foothold is key to consolidation after it dropped from 1.2 million parcels a day, closing 75 per cent of outlets and laying off 15,000 employees. Today, it handles $1 billion of Dell and Amazon sales alone.


"International is the core strength of DHL," said DHL Express chief executive officer Ian Clough in an interview with Bloomberg. By investing $40 million in its Cincinnati hub it hopes to add gates and technology to speed scanning and sorting which it says are "paying for itself" by creating earlier and more timely deliveries from a reduced workforce of 6,000 and 2,500 trucks and vans.


Amsterdam-based Kepler Capital Markets analyst Andre Mulder advises a complete exit from the US, to rid DHL of an operation which drags down its entire operation. Last year alone it made a loss of EUR$7.5 billion for a subsidiary that amounts to a fifth of Deutsche Post's revenue.


German analyst Per-Ola Hellgren said its entry into the US was a unsound business concept but "since they had got in there and started to bleed, there really was no alternative".


DHL's move out of US domestic territory has impacted FedEx which has seen international business rebound, said spokesman Jess Bunn. "When you take the United States out of a global network, it creates a lot of issues in terms of the value that a company can bring to its customers."
(Source:http://www.schednet.com)