ATLANTA — A fight is brewing over a deal to make DHL the largest airfreight customer of UPS.
DHL, one of UPS's main rivals, has proposed letting UPS fly its packages in the United States. DHL would still deliver them by truck, but Big Brown would fly the packages and cargo on its planes. The deal would give UPS a $1 billion customer, its largest.
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It also would put 8,200 employees and pilots out of work at DHL's hub in Wilmington, Ohio.
As the two companies work behind the scenes to ink a contract, which could take months, Ohioans and pilots are trying to stop it. They are lobbying against the deal, urging federal antitrust officials to investigate and filing a labor grievance.
"We knew there would be some loss of jobs" because of the current economy "but we thought those jobs would be in the hundreds, not the thousands," Wilmington Mayor David Raizk told The Atlanta Journal-Constitution.
Raizk said he feels misled by DHL. He was visiting the parent company's German headquarters for another reason when he was blindsided by the news. "It was a total, total surprise."
DHL is seeking the deal, because after spending $300 million on DHL Air Park in Wilmington, its U.S. operations haven't been profitable. "Our continued losses in the U.S. are not acceptable and the state of the U.S. economy requires more immediate action," said DHL spokesman Robert Mintz.
DHL says it can save $1 billion by contracting with UPS instead of two air cargo carriers at the air park. State officials are concerned after approving $422 million in state incentives for the company.
DHL is the Belgium-based subsidiary of the $83.6 billion giant that is Bonn, Germany's Deutsche Post. Deutsche Post bought the 39-year-old U.S. company in 2002, and the following year bought Airborne Express, a discount package carrier. UPS and Memphis-based FedEx challenged the foreign-ownership and feared the German post office could pour endless cash into the operations. To quiet critics, DHL kept Airborne's ground business but spun off the cargo airline as ABX Air.
Mayor Raizk and Ohio Lt. Gov. Lee Fisher formed a community task force to save the DHL business or redevelop the two-runway Wilmington Air Park. It's the largest privately owned airport in the world and exclusively handles DHL flights, Raizk said. They've asked the White House to investigate the deal for antitrust violations. The White House agreed, said Raizk.
The city of 13,000 is also holding prayer vigils and got W.R. "Tim" Timken, the U.S. ambassador to Germany and a retired Ohio businessman, to lobby Deutsche Post's CEO Frank Appel to reconsider.
The Air Line Pilots Association, which represents 500 DHL pilots who work for ASTAR Air Cargo, another DHL contractor, has filed a grievance, claiming their recent contract was negotiated in bad faith by DHL. The pilots say DHL must have known it soon would cancel the March contract. The proposed UPS deal was announced in May. A grievance hearing will take place in Chicago on July 18.
"We're fighting for our careers, our company and the American consumers. Really, that's what we're doing here," said Capt. Pat Walsh, who leads the ASTAR pilots. Another 650 pilots fly for ABX Air Cargo, which is 49 percent owned by DHL and is represented by the Teamsters.
UPS says, however, that the DHL deal would be similar to an arrangement the U.S. Postal Service has with UPS and FedEx. Both carriers airlift packages for the post office, which then delivers them on its trucks.
And what is bad news for Wilmington, Ohio, could be a windfall for others. The DHL contract could mean UPS will hire more staff at Worldport, UPS's Louisville, Ky., air hub.
UPS spokesman Norman Black says, however, that UPS has no plans to hire DHL pilots that lose their jobs. He also said UPS wouldn't use the Wilmington hub, which is only 150 miles from Louisville. He doesn't believe there are "antitrust implications whatsoever."
David G. Ross, a transportation analyst for Stifel Nicolaus, says he thinks the deal will be good for UPS.
"Essentially, if it increases the utilization of their aircraft, the most expensive asset they have ... it increases their profitability," said Ross.
Ross said it's clear the pilots and Ohio officials are trying to figure out "a way to protect their jobs," but he doesn't see any collusion, because DHL and UPS still will have separate customers.
Rachel Tobin Ramos writes for The Atlanta Journal-Constitution. E-mail: rtramos AT ajc.com.
