Airborne ExpressAirborne Express

By: Ganymede TeamBy: Ganymede Team

Spring 2008Spring 2008

IntroductionIntroduction

BackgroundBackground Unique Approach and Current Unique Approach and Current

OperationsOperations Major Comparisons to RivalsMajor Comparisons to Rivals Current News with AirborneCurrent News with Airborne Future Questions for AirborneFuture Questions for Airborne RecommendationsRecommendations Airborne Today; 2008Airborne Today; 2008

Airborne’s BackgroundAirborne’s Background Airborne Express is a express mail and Airborne Express is a express mail and

cargo delivery companycargo delivery company It is the third largest after FedEx and UPSIt is the third largest after FedEx and UPS Airborne was founded as the Airborne Airborne was founded as the Airborne

Flower Traffic Association of California in Flower Traffic Association of California in 1946 to fly flowers to the state of Hawaii.1946 to fly flowers to the state of Hawaii.

Airborne Express developed special narrow Airborne Express developed special narrow containers which allows the use of containers which allows the use of passenger jet aircraft without needing a passenger jet aircraft without needing a large cargo door modification. large cargo door modification.

It’s headquartered in Seattle, Washington, It’s headquartered in Seattle, Washington, with its own airport hub at Wilmington, with its own airport hub at Wilmington, Ohio.Ohio.

Airborne’s Unique ApproachAirborne’s Unique Approach

Airborne Express targets the business Airborne Express targets the business customers that regularly ships large volume customers that regularly ships large volume of urgent itemsof urgent items

They purposely pass over residential and They purposely pass over residential and infrequent shippersinfrequent shippers

Airborne tailors to specific business needsAirborne tailors to specific business needs Vice president, Ray Barry, said, Vice president, Ray Barry, said,

““The customers needs we have targeted to fill are what we are The customers needs we have targeted to fill are what we are best at. If we had large order customers requiring nothing best at. If we had large order customers requiring nothing but residential deliveries, we might be able to serve them as but residential deliveries, we might be able to serve them as as well as we know how to . Since we can’t be all things to al as well as we know how to . Since we can’t be all things to al people, we pick our kind of customer deliberately.”people, we pick our kind of customer deliberately.”

Airborne’s Current OperationsAirborne’s Current Operations

Airborne has 13,300 vans, fleet of 175 Airborne has 13,300 vans, fleet of 175 aircrafts 12,700 full-time and 8,000 part-aircrafts 12,700 full-time and 8,000 part-time employees time employees

Airborne owns the airport that serves as its Airborne owns the airport that serves as its major hub, which is unique from other major hub, which is unique from other express mail companiesexpress mail companies

It does not have to pay landing feesIt does not have to pay landing fees It dos not have to tailor to other facility needsIt dos not have to tailor to other facility needs If has to maintain the airportIf has to maintain the airport And it does not share other expenses with other And it does not share other expenses with other

airlinesairlines

Airborne’s Current OperationsAirborne’s Current Operations

Airborne buys used aircrafts and Airborne buys used aircrafts and modifies themmodifies them Modifies Modifies passenger doors to fit Airborne’s passenger doors to fit Airborne’s

cargo containerscargo containers Airborne does not Airborne does not does not require large cargo does not require large cargo

doors to transport cargodoors to transport cargo

Shippers and recipients were heavily Shippers and recipients were heavily populated in metropolitan areaspopulated in metropolitan areas

Airborne uses independent contractors Airborne uses independent contractors to handle 60-65% of Airborne’s volumeto handle 60-65% of Airborne’s volume

Technology and MarketingTechnology and Marketing

Major software is Freight On-Line Major software is Freight On-Line Control and Update System Control and Update System (FOCUS)(FOCUS) Allows customers to trace packages and Allows customers to trace packages and

submit shipping informationsubmit shipping information Not as advanced as its rivalsNot as advanced as its rivals

Targets major shippers via 500-Targets major shippers via 500-person sales forceperson sales force

Does not advertise in mass mediaDoes not advertise in mass media

Major Major ComparisonsComparisons

Airborne has its own airportAirborne has its own airport Airborne has unique planesAirborne has unique planes Airborne targets the business Airborne targets the business

customers that regularly ships in bulkcustomers that regularly ships in bulk Airborne tailors to specific business Airborne tailors to specific business

needsneeds Used independent contractors for 60-Used independent contractors for 60-

65% of the deliveries65% of the deliveries

Airborne’s StrengthsAirborne’s Strengths

Airborne has its own airport hubAirborne has its own airport hub Airborne’s planes were usually 80% fullAirborne’s planes were usually 80% full Airborne picked up and delivered more Airborne picked up and delivered more

parcels per stopparcels per stop Saved 30% between pick-up and drop-off costsSaved 30% between pick-up and drop-off costs

Airborne tailors to specific business needsAirborne tailors to specific business needs Greater portion of Airborne’s deliveries Greater portion of Airborne’s deliveries

were afternoon and second-day deliverieswere afternoon and second-day deliveries Allowing them to use more trucks more oftenAllowing them to use more trucks more often

This saves Airborne over 50% in delivery costsThis saves Airborne over 50% in delivery costs

Airborne’s WeaknessesAirborne’s Weaknesses

Airborne does not express a lot of Airborne does not express a lot of residentialresidential

Airborne only guarantees overnight Airborne only guarantees overnight deliveries by noon the next day (rivals deliveries by noon the next day (rivals guarantee by 10:30am)guarantee by 10:30am)

Only 96% of Airborne’s arrive on timeOnly 96% of Airborne’s arrive on time FedEx and UPS are 99% or higherFedEx and UPS are 99% or higher

Software is not nearly has advanced as Software is not nearly has advanced as rivalsrivals

Marketing is not as aggressive as rivalsMarketing is not as aggressive as rivals

Airborne and RPS?Airborne and RPS? Roadway Package System (RPS) is a Roadway Package System (RPS) is a

strong ground delivery companystrong ground delivery company Airborne is forming a good relationship Airborne is forming a good relationship

with Roadway Package System with Roadway Package System RPS targets the large ground transport RPS targets the large ground transport

needs of large-volume business customers needs of large-volume business customers Putting a dent in UPS’s traditional customer Putting a dent in UPS’s traditional customer

basebase This could be setting up for a very good This could be setting up for a very good

and strategic merge to compete better and strategic merge to compete better with rivalswith rivals

Current EventsCurrent Events

UPS went on strikeUPS went on strike Airborne is forming a good Airborne is forming a good

relationship with Roadway Package relationship with Roadway Package System (RPS)System (RPS)

Airborne recently had revenues up Airborne recently had revenues up by 29% over the last quarter by 29% over the last quarter

UPS and FedEx turned toward UPS and FedEx turned toward distance-based pricingdistance-based pricing

The Future of AirborneThe Future of Airborne

Is Airborne’s position secure?Is Airborne’s position secure? Can it compete with UPS & Federal Can it compete with UPS & Federal

Express in the long-run?Express in the long-run? Is the RPS partnership important?Is the RPS partnership important? Should Airborne move to distance-Should Airborne move to distance-

based pricing?based pricing? Further recommendations…Further recommendations…

Airborne & the “900-Pound Gorillas”Airborne & the “900-Pound Gorillas”

With UPS workers on strike and With UPS workers on strike and Airborne’s terrific financial results, its Airborne’s terrific financial results, its future is looking very bright.future is looking very bright.

However, since UPS is such a giant in However, since UPS is such a giant in the industry, one move requires the industry, one move requires Airborne’s full attention & immediate Airborne’s full attention & immediate action.action.

Should Airborne be worried about an Should Airborne be worried about an acquisition by UPS…? The answer is NO.acquisition by UPS…? The answer is NO.

Airborne & the “900-Pound Gorillas”Airborne & the “900-Pound Gorillas”

Federal Express has Federal Express has heavy-weight heavy-weight power, but is it power, but is it enough?enough?

FedEx recently FedEx recently raised its prices – a raised its prices – a plus for Airborne.plus for Airborne.

Airborne’s potential Airborne’s potential is a major threat to is a major threat to FedEx, thus FedEx, thus Airborne is not Airborne is not worried.worried.

Airborne and RPS…Partners?Airborne and RPS…Partners?

Is the relationship Is the relationship to RPS crucial to to RPS crucial to Airborne’s future?Airborne’s future?

What can RPS and What can RPS and Airborne do for Airborne do for each other?each other?

YESYES, RPS can help , RPS can help Airborne cut into Airborne cut into UPS’s traditional UPS’s traditional customer base with customer base with its ground transport.its ground transport.

Airborne will get use Airborne will get use of RPS’s info and of RPS’s info and tracking capabilities tracking capabilities & RPS will get & RPS will get appeal & name appeal & name recognition.recognition.

Distance-Based Pricing…A Good Move?Distance-Based Pricing…A Good Move?

In 1996 UPS changed its In 1996 UPS changed its prices to reflect the prices to reflect the distance of the parcel.distance of the parcel.

In 1997, FedEx made the In 1997, FedEx made the same changes – charging same changes – charging more for packages that more for packages that travel farthertravel farther

Will it work for Airborne?Will it work for Airborne? Customers are expecting Customers are expecting

this change simply as an this change simply as an industry trend, so YES.industry trend, so YES.

Further RecommendationsFurther Recommendations Competition comes from Competition comes from

unexpected places; unexpected places; keep keep an eye on the Postal an eye on the Postal ServiceService because they because they have done very well have done very well during the strike at during the strike at UPS.UPS.

Be aware of future Be aware of future moves by UPS because moves by UPS because they will definitely try to they will definitely try to recoup some of that lost recoup some of that lost volume.volume.

Further Recommendations Cont.Further Recommendations Cont.

In order to continue healthy growth over In order to continue healthy growth over the years, Airborne should consider an the years, Airborne should consider an alliance or merger with RPS.alliance or merger with RPS.

Globalization: Further expand Globalization: Further expand investments into overseas & global investments into overseas & global shipping; shipping; Do NotDo Not allow competition to allow competition to get too ahead of you.get too ahead of you.

Airborne Today; Since 1997Airborne Today; Since 1997 1998 - Airborne entered the Fortune 500 list for the first time. 1998 - Airborne entered the Fortune 500 list for the first time. 1999 - Airborne@Home, an alliance with the United States Postal 1999 - Airborne@Home, an alliance with the United States Postal

Service, was formed. Service, was formed. 2000 - Carl Donaway became the company's new president, 2000 - Carl Donaway became the company's new president,

which lead to many managerial changes. Also that year, Airborne which lead to many managerial changes. Also that year, Airborne started a ground service for the first time in its history. started a ground service for the first time in its history.

2001 - Airborne Express launched Ground Delivery Service and 2001 - Airborne Express launched Ground Delivery Service and 10:30am Delivery Service. Airborne.com launched some services 10:30am Delivery Service. Airborne.com launched some services of its own, including the Small Business Center and Airborne of its own, including the Small Business Center and Airborne eCourier.eCourier.

August 14, 2003 - Airborne shareholders approved August 14, 2003 - Airborne shareholders approved

the the acquisition of Airborne, Inc. by DHLacquisition of Airborne, Inc. by DHL of Brussels, of Brussels, Belgium.Belgium.

The acquisition became effective the next day. DHL retained The acquisition became effective the next day. DHL retained ownership of Airborne's ground operations and spun off its air ownership of Airborne's ground operations and spun off its air operations as ABX Air, Inc. operations as ABX Air, Inc.