UPS and DHL may renegotiate their planned $10 billion, 10-year agreement for UPS to provide allNorth America airlift for DHL Express, according to US media reports. The deal was originally due
to have been sealed by September.UPS chief executive Scott Davis told analysts during the company’s Q3 financial resultsconference call yesterday that talks between the two companies are continuing but that the “sizeand scope” of the proposed deal might change. Davis said he expected the deal to be agreed by theend of the year but gave no further details.
An agreement between DHL and UPS was due to have been reached already. Deutsche Post WorldNet CEO Frank Appel said at the announcement of US express restructuring on May 28 that anagreement was expected within three months.
Under the contract, DHL Express would pay UPS $1 billion a year to fly its domestic andinternational shipments airport-to-airport within the USA and to/from Canada and Mexico in place ofcurrent airlift providers ABX Air and Astar Air Cargo. The switchover was due to have started inthe final quarter of this year and go into full operation during 2009.
The airlift switch to UPS is a cornerstone of the restructuring of DHL’s US express business,which is losing about $5 million a day. The aim is to reduce the expected 2008 loss of $1.3 billionto about $300 million in 2011. DPWN and DHL Express executives have repeatedly publicly defendedthe restructuring plan as the only way to reduce the heavy US losses.
But the associated closure of DHL’s US air hub at Wilmington, with some 8,000 job losses,most at ABX Air, has escalated into a major political controversy in recent months. The two USpresidential candidates seized on the Wilmington job losses as a campaign issue, and two USCongress committees have held hearings over whether the UPS-DHL deal would limit competition.
