ABX Air, the largest of two U.S. freighter airlines in the DHL Express domestic network and operator of DHL's package sorting terminals, said DHL is releasing 21 of its planes in August.
That move has long been a DHL option under its ABX contracts, and still leaves ABX as the largest U.S. leased fleet with 91 freighters committed to DHL's system.
A company official said ABX will decide in the next few weeks whether to redeploy some of the older-model planes -- DC-9s and DC-8s - to other business or turn them over to DHL at what amounts to a closeout price as their contract allows.
ABX had said back in 2004 that DHL intended to remove 26 of the older ABX freighters by the end of 2005, but until now it had only taken seven out of service. The new action brings the total to 28, but ABX has also added four larger-capacity 767s into its DHL fleet in the same period.
The sudden move also follows a series of earlier steps by DHL to shed some of its ABX business, after losing some customers late last year following integration of separate ABX and ASTAR Air Cargo hubs into the main ABX-DHL facility at Wilmington, Ohio.
Service levels suffered with the September 2005 integration, and since then DHL parent Deutsche Post has repeatedly said that its U.S. express business has weighed on earnings.
Last spring, DHL directly took over the city-to-city linehaul trucking that ABX had managed on its behalf, and said it would soon take the big Allentown, Pa., sorting hub -second only to Wilmington in DHL's U.S. network - out of ABX hands. Those two segments had generated a lot of ABX income, and put more pressure on the company to build up its non-DHL business in freighter leasing and mail hub contracts.
Joe Hete, ABX president and CEO, said the removal of the 21 aircraft was linked to the hub consolidation, which "eliminated multiple duplicate air routes."
ABX said its remaining DHL-tied fleet will consist of 59 DC-9s, 29 767s and three DC-8s. DHL will fund the depreciation for eight of the DC-9s it is removing until August 2010, which covers the rest of their depreciable life, to have the engines available for DC-9s still in DHL service
But ABX said the annual drop in cash flows from the other 13 aircraft would be about $2.1 million. They have a book value of $4.8 million, and ABX has rights to "put" them to DHL for the lower of fair market or book value. ABX said over the next 30 days it will evaluate options from operating them for other customers to selling them off for parts.
John D. Boyd
