Noah Werka

Anybody out there heard anything about this, or have any idea what is going on with it?

captjns

Why would a cargo company purchase a passenger operation?

NZAV8R

QUOTE=captjns]Why would a cargo company purchase a passenger operation?[/QUOTE]

There are probably many factors that could cause ABX to want to diversify their revenue stream. It’s a good question and really one only ABX has the answer for; however, I'll give it a go. It could be that ABX management knows something that we don't. Maybe they're concerned about their future. It certainly is in their interests and that of their shareholders to be thinking ahead. Therefore, it might be part of a strategic plan to hedge their bets now in the event of circumstances that may or may not eventuate in their future; in short, to cover their a$$. If what Noah werka says is correct (ABX considering buying out PACE Airlines), it could be that they see it as a timely opportunity to diversify their interests. And given the decline in their main source of revenue from 2005 to 2006, if they do decide to grab that business opportunity it might turn out to be a smart move.

http://www.abxair.com/ir/index.html

cac737

Dude that was so awesome, you wrote an entire paragraph without basically saying anything at all! Have you ever thought about politics? Im just kidding man, welcome to the forum. But ya really didnt provide any useful info, what you said could be applied to any company anywhere!

The question remains, why would a cargo airline be interested in a passenger airline? (besides to diversify) Actually it could be a de-worseify because the two are not compatible, dont play to either's strength and would require vast amounts of investments to set up operationally speaking, unless they keep both companies separate, but again ......why?

NZAV8R

cac, thanks for the welcome mate. Even though you’re kidding, I have to say that politics as a career is not something I intend on pursuing. However, to be PC (pun intended) first I must make a retraction before I continue. What I said earlier about ABX's revenue declining in is not correct. In fact their statement of operations and their earnings summary, ending 3/31/06, indicates that year on year their revenue actually increased. I know, yawn, stretch, ...but details are important.

Ok cac, here's another paragraph for ya...The pertinent info that makes me think that they are wanting to look for other sources of revenue (that might include pax ops) besides DHL (which btw is their main source of income) can be found in the summary of the notes to the financial statements:

Aircraft Fleet Consolidation

As previously reported, DHL indicated in November of 2004 that it intended to remove twenty-six aircraft that ABX Air operates on its behalf by the end of 2005. Since November of 2004, seven aircraft have been removed from active service under the ACMI agreement by DHL. While a reduction in scheduled routes flown by ABX Air was implemented in September 2005, ABX Air has not received further notification from DHL of the release of specific aircraft from the ACMI agreement. The timing and number of additional aircraft reductions are at the discretion of DHL.

Now you may be wondering where this is leading, but stick with me on this. ABX Air is one of two operators on contract to move material for DHL Express, the other being A-star Airlines (formerly known as: DHL Airways). It is DHL who decides which of the two moves what. At present ABX still moves more than A-Star, but who’s to say that won't change. If DHL does pull the plug on all 26 aircraft (23% of their fleet of 112) as indicated above what do you think ABX is going to do with them? It's a given that this would be a concern for them. No doubt they are looking at other ways to generate increased business still within the airfreight arena; as stated in the notes to the financial statements. However, out of necessity it is also plausible that they now looking at ALL their options for revenue generation as a part 121 operator. For 23 years that company (formally known as: Airborne Express) operated as a single entity with continuous and almost guaranteed source of income. However, owing to the 2003 acquisition of Airborne by DHL Express, the air operations side of Airborne was separated from its parent company and ABX Air was formed as an independent publicly listed entity. Their revenue is no longer a given (not that it ever really was), it is now derived primarily from one client -DHL- and due to the intimate relationship they have with that client they essentially reliant on and are more or less are the mercy of DHL management to accept what they are given; much the same as the situation the Regionals find themselves in with the Legacy carriers.

As you know there are three main players in the US domestic air express market: Fedex, UPS and DHL. Combined they dominate about 96% of the market. The other 4% of the US market share consists of USPS Express mail (about 3%; which I think is actually moved under contract by Fedex) and other companies (Bax global, Menlo, etc). As Fedex and UPS operate their own fleet they have no need to utilize outside contractors such as ABX Air. So that leaves ABX in a bind. How can they generate more revenue? Start up their own air express operation and market it to the masses and open up shop on every street corner like the others? Just say did, how could they achieve that without sacrificing or jeopardizing their current source of revenue? Let alone the outlay would make it financially prohibitive. On one hand ABX have a reliable source of income from DHL, but at the same time that client has intimated that at their discretion some time in the future DHL will likely reduce its need for 23% off ABX Airs current operating fleet. What do think ABX will do with those extra 26 aircraft? ABX is essentially between a rock and a hard place. The US air express industry is fiercely competitive and contrary to what you might think part 121 air express contract work is not that easy to come by in the current environment. It is very unlikely that think DHL or any of the others will be so kind as make room for ABX if they ever chose go out on their own in direct competition. My point is that unless ABX diversifies its operation whether it be in the form of international airfreight or (as crazy as it sounds) passenger ops, they are going to have to suck it up. I don’t think the shareholders will be too happy about that.

I still say that if ABX air are looking at their options they may be see an acquisition of a pax operation as a solution to their present-future dilemma.

I am the first to admit that I am not that famliar with PACE, but it appears that if ABX were to acquire that outfit as a going concern ABX would not have to start from scratch. And most probably they would operate the two entities on separate air service certificates (at least for the time being). An example that comes to mind is Skywest’s recent acquisition of ASA. Yes, agreed at least they are both pax operators, but from what I gather they still operate as very different organizations. Furthermore, it appears that before his passing last weekend, Hooters- CEO Bob Brooks, was keen to get out of the air pax business altogether, so the timing is right for a buyout.


The Future Of Hooters America Without Bob Brooks

Monday, Jul 17, 2006 - 10:42 PM


Elise Olson
Reporter
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Biography



Officials with Hooters America received word of Bob Brooks' death over the weekend.
A spokesman for the company says before his death, Brooks was hoping to move the company away from Hooters Air charter flights.
The company had already cancelled scheduled passenger service on April 17-th.
Officials say the company is now in the hands of Brooks' son, Coby.
He took over the position of Hooters president and CEO three years ago.
Officials says Brooks' was the visionary of the company.
Hooters America spokesman Mike McNeal says, “The passing of Mr. Brooks is the end of an era. He was a beloved leader. He was a very generous man and I think he was very much respected."
Officials say during the upcoming Hooters National Convention, special video tributes and memorials are planned to honor brooks.
There are also plans for special recognition in all Hooters restaurants.

http://www.morningnewsonline.com/mid...7-17-0009.html

Ok that was more than one paragraph, but I hope made my point more clear. I know I said something this time.

UPS A-380 pilot

You guys are totally off base in regards to ABX being interested in Pace. The real reason is that ABX needs to diversify it's sources of revenue. They already do a small amount of third party MRO in the mx hangers in ILN that are NOW owned by DHL. ABX wants to expand it's third party MRO, so the only option is to have a facility not located in ILN that is NOT controlled by DHL. Pace has a part 145 repair station and mx facility in INT. That is what ABX is after. They are NOT interested in any part of Pace's pax ops, taking over leases of their planes or integrating their crews. Another reason ABX is interested is that they are getting 11 more ex-Delta 767s that are earmarked for ABX use, NOT DHL. Those planes are for now, to be painted in ABX colors and used for expansion of their charter flying in S. America. ABX and DHL have stated that there is NO additonal parking spaces available in ILN for anymore aircraft, yet alone one's that are not for DHL use. So where is ABX going to park these new 767s that are not for DHL use? That's why they are interested in Pace's facility in INT. The parking at ILN is already taken up and ABX is forced to park surplus planes in CVG, at the Robert's hanger in ILN and they have two DC-8s pushed in a DITCH on the east side of rwy 4R-22L!!! Joe Hete has a gag order out for all ABX management concerning comment on Pace. Wonder why he would do that? LOL Don't be surprised in the future to see ABX moving it's headquarters to INT. Oh, one more reason ABX is interested in Pace is to screw the ILN mechanics that work in hvy mx. ABX will either tell them to move to INT if they want a job of just ****can them and use the mechanics already at the Pace facility.

cac737

Hey UPS guy, your theories may be closest to the mark, but you have to know that the hangers in INT are not owned by Pace, but instead leased from TIMCO. Pace has been trying to get more hanger space in INT, but since TIMCO is aware of what they are trying to do, they have not negotiated for anymore hangar space. Now, I am not sure when the lease will expire, but given Pace's new 145 status and now being a competitor, I will interested to see what happens come negotiation time.

UPS A-380 pilot

Thanks for the info.

NZAV8R

Hey UPS, that makes sense about ABX wanting it for the mx aspect; pax ops did seem an unusual prospect. Thanks for the additional insight.

ultradrvr

UPS A-380 Pilot.....Ding Ding Ding Ding....we have a winner!!!! Hey bob O tell him what he has won! (ya didnt hear it form me though)