Originally Posted by
Brown
Very simplistic and dirty math here so go easy on me but...
According to the DPWN's cc last week, DHL is walking away from $3.1B a year in domestic USA revenue by January 31, 2009.
Knowing that the deal between UPS/DHL was supposed to be for $1B a year, it now seems that if UPS and FedEx split the $3.1B right down the middle, UPS will make more (better than $1.5B) than they would have with the UPS/DHL deal in the first place.
It also seems that FedEx should be glad that DHL is packing up and leaving because now FedEX is looking at splitting the $3.1B with UPS.
Now I realize that not all the old DHL accounts will convert to UPS and FedEx (some may go to the Post Office and others may not even renew at all), but even so, the loss of DHL in the marketplace will certainly allow UPS and FedEx to raise prices without DHL undercutting them any more.
Just my dirty math, but as a fairly junior UPSer, these numbers make me a little less concerned now that it seems the big UPS/DHL deal is off/stalled/whatever.
UPS and FDX have been reasonable competitors for decades. I don't think you'll see huge price increases. Why? Because relability and the market value drives the price rather than the competition. As far as rates go, FDX usually bumps their rates in January but they do it at a reasonable level. I believe FDX is bumping prices close to 6-7% and reducing the fuel surcharge down 2% for a reasonable net increase. Who knows? The fuel surcharge could fall even more. In the cargo world, DHL was not a reasonable competitor. DHL tried to bring a discount shopper mentality to the cargo side of ops. By slashing prices way below what it took to do the job, DHL played high stakes poker in the hopes of securing market share. If they could have slashed prices and maintained quality and reliability, they'd still be in business in the USA. However, in cargo ops, those concepts rarely go together. Reliability is the king.
It will be interesting to see what happens in the cargo market......that is for sure.
Please don't take this as a personal slam to any DHL employee. I know several and I'm sorry you guys are taking it in the shorts for your management's short sided, poorly planned, market strategy. Godspeed on your journey guys/gals.