Fuel costs, economy compel shipping agreement

29 May 2008 18:54  [Source: ICIS news]

HOUSTON (ICIS news)--Jet fuel costs and a sluggish economy forced German-based freighter DHL to collaborate with a single contractor for North American airlift transportation, a company spokesman said on Thursday.

“We’re always looking to improve efficiency but certainly the economy’s downturn and fuel costs have accelerated our plans to make changes to improve our financial status,” said DHL spokesman Jonathon Baker.

DHL announced on Wednesday that it was forming an agreement  with Atlanta-based UPS to provide airlift for cargo into the US from Canada and Mexico.

“There is no change in terms of the service we provide,” Baker said. “It is who ever can save us the most money.”

Rising fuel costs have not only impacted the bottom line for DHL, but UPS, too.

“Two years ago, fuel costs were 4% of our operating rates,” UPS spokesman Ken Stenard said. “Now it’s looking at 6%.”

With a barrel of crude oil trading in excess of $130, jet fuel costs are forcing passengers carriers and shippers alike to look inward to improve their economics, according to MIT airline data research engineer William Swelbar.

“This is clearly a tactic that DHL and UPS are employing to address the immediate concerns, but as we move down the road, the cargo sector will have to evaluate its strategies and tactics just like the passenger sector is doing today,” Swelbar said.

“[The airline industry is] in a place we’ve never been,” Swelbar added. “We thought oil was high back in 1979. This time it doesn’t appear to be a blip on the radar screen; it’s reality.”

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By: Steven McGinn
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