ATW Daily News

ABX Air unveils post-DHL plan, will shrink 70%-75%

Tuesday November 18, 2008

ABX Air parent Air Transport Services Group yesterday outlined its plan to survive beyond next year's expected termination of its operation as a DHL subservice airline, saying it will become a smaller, diversified company that will wet- and dry-lease aircraft and provide expanded MRO services to third parties at its Wilmington, Ohio, base.

President and CEO Joe Hete said the "much different" company will be 25%-30% of its current size and will seek to negotiate lower-cost labor contracts with employees who will be retained. More than 6,000 ABX workers are expected to lose their jobs owing to the loss of the DHL air lift business. DHL last week announced its intention to withdraw from the US domestic market on Jan. 30 and turn over the line-haul air portion of its US international shipping to UPS (ATWOnline, Nov. 11).

"It's now clearer than ever. . .that ABX's relationship with DHL will be winding down rapidly," Hete told analysts and reporters yesterday. But he insisted ATSG will become a "pretty solid business with great prospects" that will operate ACMI cargo flights for carriers throughout the world, dry-lease aircraft via its Cargo Aircraft Management leasing unit and expand its Wilmington MRO business beginning in the 2009 second quarter to offer services "as part of a package" to ACMI customers and third parties.

Under its new business model, it plans to retain 14 of the 27 767Fs it now operates for DHL to transition to ACMI operations. It will return five of the remaining 13 to lessors and sell the rest, including possible sales to DHL. It estimates the current book value of each 767F at $4.5-$5 million. Hete said ATSG will maintain a fleet of 36 freighters. ABX's current operating fleet of 116 aircraft comprises 29 767Fs, 15 DC-8Fs and 72 DC-9Fs, most of which it plans to sell or return to lessors.

ATSG last week reported third-quarter net income of $5 million, more than double a $2.5 million profit in the year-ago quarter, on a 41% lift in revenue to $403.1 million, $276.8 million of which was generated from DHL-related business. Hete noted that non-DHL revenue for full-year 2008 is expected to be about $500 million, up from just $13 million in 2004.

by Aaron Karp

Other headlines:

Sponsored Links