DHL Finally Finds a Way to Compete With FedEx and UPSby
If you begin seeing more yellow helicopters in the sky, it’s a sign that DHL Express is on the mend.
Six years after the German company quit the American market for domestic-only shipments amid heavy losses, DHL Express has begun winning new business among U.S.-based outfits that source goods and export their finished products abroad, says Mike Parra, the Deutsche Post unit’s U.S. chief. One of the big, high-margin markers: morning helicopter deliveries for banks and other large financial players in Los Angeles this spring, expanding a service the company has offered in Manhattan for several years. DHL planes with overseas shipments land at New York’s John F. Kennedy International Airport and LAX, with the banking documents going quickly to a DHL chopper.
“We’ve shaved 90 minutes off the delivery time” in Los Angeles, Parra told Bloomberg Businessweek. “You can fly right over the [Interstate] 405 and land at the Wells Fargo Center downtown.”
DHL will expand its chopper fleet to Chicago this summer and Charlotte in the fall, both cities where major banks require early delivery of commercial documents from overseas. London could also see such a service in the future. “We didn’t increase our prices at all” with the move into helicopters, Parra says, partly a testament to how costly and high-margin that product can be when time is critical.
Beyond hiring helicopters, DHL Express is embarking on a major expansion. Parra says the company plans to double its U.S. sales force over the next two years and open a new Midwest air hub in the third quarter, which he won’t identify. The hub will complement DHL’s gateways in Cincinnati, Miami, New York, Los Angeles, and San Francisco and help the company’s network support an expansion of its Asia service into JFK International, a move expected to help cut six hours from DHL’s Asia service.
All of this happy news is a far cry from 2008, when Deutsche Post pulled the plug on a five-year effort to challenge United Parcel Service and FedEx in U.S. domestic package service by buying Airborne. That venture—a “disaster,” in the words of Deutsche Post Chief Executive Officer Frank Appel—cost almost $10 billion and led to 15,000 U.S. job cuts. It also caused a rare loss for the German parent, the largest operator in the global package market by revenue.
Parra says the foray into domestic-only shipments strayed from DHL Express’s core competencies of international freight and logistics. The company now focuses exclusively on moving packages to and from the U.S., a business that offers higher margins and not the “pennies on the dollar” that domestic-only packages usually average. “They just continue to beat on their margins,” Parra says of DHL’s rivals in the domestic market.
Of course, UPS and FedEx also offer international service in most of the 220 nations and territories that DHL covers, allowing them to give customers a bundle of services, much the way cable and telecom operators package and discount television, phone, and Internet to lure multiservice subscribers. “They play the bundle against us constantly,” Parra says with a sigh.
If you have papers that need to get to and from some of the world’s dodgiest locales—Syria, Sudan, Cuba, or North Korea, for example—the German post’s network is a safe bet to get them there. Parra says Uncle Sam is the company’s largest customer, followed by major global shippers such as Amazon.com, Dell, Apple, Covance, and Hewlett-Packard.
“We’re back to being focused on doing what we do best,” Parra says of the company’s painful reorganization. To that end, every DHL Express worker—including the CEO—is now trained as a “certified international specialist,” versed in the particulars of customs, tariffs, and other global shipping matters. Before leaving the interview, Parra proudly points out the “CIS” designation on his business card.