Politicians Climb Onto the DHL-UPS Deal

Republicans and Democrats are calling for a close look at the agreement that would have DHL paying UPS approximately $1 billion a year for the next 10 years to move its packages by air. DHL has experienced heavy losses in its attempts to gain a significant foothold in the domestic US market.

A consequence of moving its air freight to UPS will be the closing of DHL’s present air hub in Wilmington, OH. UPS would be using its WorldPort facility in Louisville, KY for the movement of DHL’s packages. With the alliance, DHL would use its US ground network for pickup and delivery. UPS would function solely for package movement by air. Additionally DHL would curtail its use of Astar Air Cargo and Airborne Express (ABX) for airlift.

An alliance such as this one would receive regulatory and other governmental scrutiny at any time, particularly since it’s claimed that some 6,000 jobs will be lost in Ohio at the Wilmington hub and an additional 2,000 jobs by Astar. The Air Line Pilots Association has filed a lawsuit against DHL, claiming it has breached pilot job security commitments that were awarded in negotiations between pilots and the company.

This being a presidential election year in the US, it has become a political matter. In late July, Senator Barack Obama (Dem.-IL) called for the Bush Administration to carefully examine the consolidation of DHL air operations into UPS. Senator John McCain (Rep.-AZ) calls the deal a “train wreck” and said he would do everything within his power to stop it.

Senators Orrin Hatch (Rep.-UT) and Herb Kohl (Dem.-WI) of the Senate Antitrust Subcommittee have asked the Department of Justice to examine the deal. Representative James L. Oberstar (Dem.-MN), chair of the House Transportation & Infrastructure Committee has said that when Congress returns it will undertake an examination of the alliance.

In the meantime, DHL and UPS continue to work together to hammer out details of the agreement.