ABX Air, the US cargo airline operating mostly for DHL Express, has announced two contracts fromthe US Postal Service (USPS) to compensate for declining revenues from DHL. The airline has also
announced lower overall revenues and earnings for the second quarter of 2006.Under the USPS contracts, the airline’s freight handling subsidiary ABX Cargo Services willmanage the postal surface transfer centers in Dallas, Texas and Memphis, Tennessee, from September2006 onwards. The two four-year contracts will each generate annual revenues of about $5 million.ABX already operates the USPS hub at Indianapolis under a two-year contracted gained in 2004 andworth $6.5 million in annual revenues.
“ABX Air has 25 years of experience managing hub operations for Airborne and now DHL,” statedJoe Hete, President and CEO of ABX Air. “We have developed excellent work processes, reportingsystems and contingency planning as part of a uniform business model that could be transferred toother USPS operations, should such opportunities arise. For now, we are looking forward toexpanding our business relationship with the U.S. Postal Service beyond the on-demand airliftcapacity contract currently in place.”
For Q2, 2006, ABX Air reported revenues of $303.6 million and net earnings of $6.5 million,or $0.11 per share, for the second quarter of 2006. For the quarter, ABX Air’s revenues declined$47.7 million and net earnings declined $0.3 million, or $0.01 per share, compared with the secondquarter of 2005. Earnings during the second quarter of 2006 were negatively impacted by thereduction in truck line-haul management services provided to DHL, ABX’s largest customer.
“We continue to focus on improving the cost efficiency of the services we provide to ourlargest customer,” said President and CEO Joe Hete. “We have particularly been encouraged by theproductivity improvements in our hub services group, where we are maintaining high service levelswhile reducing our costs through the first six months of 2006.”
DHL recently announced it will no longer need 21 ABX Air dedicated aircraft from Augustonwards. But ABX Air has the right to sell 13 of these aircraft to DHL for less than their $4.8million book value. DHL is also due to take over running its regional ground hub at Allentown, Pa.,from ABX Air in the first quarter of 2007 when a new automated facility opens there.
