DHL finally bails out of US domestic ops

After weeks of speculation DHL finally bailed out on its five-year push to become the “third alternative” to UPS and FedEx in the US express market. From early 2009 all domestic US services will cease as the company focuses on international operations to/from 15-20 US metropolitan areas. “The basic reason is that the US is […]


Airborne Express DHL duopoly market John Mullen


After weeks of speculation DHL finally bailed out on its five-year push to become the “third alternative” to UPS and FedEx in the US express market. From early 2009 all domestic US services will cease as the company focuses on international operations to/from 15-20 US metropolitan areas. “The basic reason is that the US is a highly concentrated duopoly market and the reality is. . .UPS and FedEx’s scale, market reach and brand awareness have made it impossible for us to make it economically viable,” DHL Express CEO John Mullen said. Mullen estimated that DHL lost around US$10 billion over the last five years on its US venture including its original investment in purchasing Airborne Express and its Wilmington, Ohio, air hub. The company estimates it lost about US$1.3 billion annually on US operations, “a level of loss that cannot be sustained,” he said. He said Airborne was a “small niche player of low quality,” and despite DHL’s best efforts it “never became big enough and never had enough reach to be able to compete with the two incumbents.” DHL is “more than willing” to donate the Wilmington airport to the state of Ohio, he added. DHL is still in discussions with UPS to turn over the domestic line-haul flight portion of its international shipments to/from the US to its rival, with Mullen saying he hoped these would be concluded by year-end 2008. But the volumes are expected to be substantially less – around 100,000 daily shipments – than the 1.2 million orginally envisaged. DHL is looking at operating international flights into five US gateways, including New York, Los Angeles and Louisville, and using line-haul contract flights operated by UPS Airlines to reach 15-20 markets that cover about 80-90 per cent of its international shipping in the US. It will contract smaller cargo operators to reach the remaining 10-20 per cent, according to Mullen. DHL generates about US$4.5 billion annually in US revenue, of which US$1 billion comes from international services.