Senior executives of DHL Express and UPS yesterday defended their planned $10 billioncooperation deal for North America airlift to a US Congress committee, rejecting claims it would
limit competition or amount to a merger.Under the cost-cutting plan, DHL Express USA, heading for a $1.3 billion loss this year, aimsto switch its North America air uplift from subcontractors ABX Air and Astar Air Cargo to UPS undera $1 billion-a-year, 10-year contract. This would mean the closure of its present US air hub atWilmington, Ohio, with the expected loss of some 8,000 jobs, mostly at the two airlines. Ohiopoliticians lobbying to prevent the hub closure have forced two separate Congress committeehearings on the plans.
John Mullen, DHL Express Global CEO, told the House of Representatives judiciary committee thatthe proposed deal with UPS did not involve a merger, would not violate US anti-trust laws and wouldnot reduce competition. The deal would enable greater long-term savings that any combination of ABXand Astar, which DHL had previously supported, he noted.
DHL would retain “complete control” over all customer-related business activities, would havefull control over its ground operation, and would remain “an independent and viable competitor inthe US air express delivery sector”, he said, according to a report in the Wilmington News Journal.He reiterated the need for “decisive action” to stop DHL Express’ heavy US losses of $5 million aday.
Reuters cited Mullen as saying that DHL had invested some $5 billion in the USA since 2003 tocompete with UPS and FedEx. DHL said yesterday that it would pay some $260 million in severancepayments and benefits to workers affected by its US restructuring, the report added.
UPS senior vice-president Burt Wallace told the committee that UPS would only be providing airtransportation services for DHL, and stressed that the cooperation would in fact preservecompetition and protect some 40,000 jobs at DHL, the Los Angeles Times reported. Wallace rejectedsuggestions that UPS might be able to manipulate the flow of DHL packages through its system forcompetitive advantage as “simply untrue”, and said UPS would continue to compete “vigorously” withDHL. The two companies would “each price and market [their] own brands and services. We will notshare profits, costs or information about pricing of services to each other’s customers,” hestated, according to the Atlanta Journal Constitution.
Ohio lieutenant-governor Lee Fisher suggested that to protect the Wilmington hub while enablingDHL to cut costs in the USA, the two sub-contractor airlines Astar Air Cargo and ABX Air couldmerge, while Congress might permit DHL to own a US airline in exception to the law banning foreigncontrol of US air carriers.
Judiciary committee chairman John Conyers said the committee would hold another hearing on theissue in future. “We are worried about it. Any transaction in which one package delivery company’sentire air service is provided by a competitor must be viewed with a heavy does of scepticism,” hecommented. The House of Representatives’ transportation committee will hold a separate hearing onthe DHL-UPS cooperation on September 16.
