Two US congressmen have asked for a review of a proposed tie-up between DHL and UPS by the antitrust division of the Department of Justice and the Federal Trade Commission.
In May DHL informed its current US partner Air Transport Services Group subsidiary ABX Air that it reached an agreement with UPS for the company to assume ABX operates DC9s and Boeing 767s on behalf of DHL in the US.
DHL through its proposed 10-year deal with UPS is attempting to restructure its US Express business, which is estimated to post a $1.3 billion pre-tax loss this year. Once the revamp is complete, DHL has said it should see costs savings of $800 million in 2010 and roughly $1 billion in 2011. UPS has said the deal could generate up to $1 billion in additional revenue annually.
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US Senators Herb Kohl from Wisconsin and Orrin Hatch of Utah have sent a letter to Assistant Attorney General Thomas Barnett and Federal Trade Commission William Kovacic stressing the deal needs careful examination by each agency.
The congressmen argue that DHL will become reliant on one of its two major competitors for air transportation in the US. “This raises the question if DHL will still be able to effectively compete against UPS, since UPS will now have a large role in determining the cost and quality of DHL’s services,” the legislators note in a letter to the heads of the two agencies.
Additional concerns voiced by the two senators include the risks of economic disruption if service on one of the two carriers is disrupted by a strike or maintenance issues.
The legislators explain they presume that “such a relationship would also require DHL to adopt UPS’s package tracking, labeling and hub distribution systems. Whether, and how, DHL packages will receive priority should UPS planes fill to capacity is another concern raised by this deal”.
Furthermore Senators Kohl and Hatch warn that a quick ratification of the agreement would have a “devastating financial impact” on the southern Ohio base of ABX.
The Ohio State Attorney General office is also scrutinizing the DHL-UPS deal, and has warned both companies that documents related to the negotiations between of the proposed deal could be relevant to any review or investigation by the state of the agreement.
Source: Air Transport Intelligence news
Source: Flight International
