*Airborne Hopes to Spur Growth With New Initiatives
According to Airborne, a lack of adequate growth in domestic shipments and a rise in fuel costs has affected the company's business throughout the past year and will cause a loss in the current quarter.
The carrier last week added another 1 percent to its fuel surcharge for all shipments moving through its transportation network, effective Oct. 16, to mitigate rising fuel costs. At that time, there will be a 4 percent surcharge applied to all domestic, Canadian and International Express shipments.
"Based on activity for the first two months of the quarter, we estimate Airborne will lose between 5 cents and 10 cents per share in the third quarter but will remain cash-flow positive," said Robert Cline, chairman/CEO of Airborne.
The company will issue final results for the third quarter during the week of Oct. 30.
"We are confident that Airborne can compete effectively in the marketplace over the long term," said Cline. "We are aggressively addressing the volume shortfalls in our domestic shipments by initiating numerous programs to reverse the current trend and boost overall domestic shipping revenues."
The specific actions focus on stimulating near-term growth while enhancing products and services to build long-term value, including:
( Targeted marketing initiatives to leverage yield management and capacity utilization;
( Pursuing the higher yielding small-business markets;
( Enhancing the suite of products offered, including a ground service;
( Improving sales effectiveness;
( Expanding its third-party logistics capabilities;
( Increasing Airborne's online offerings and capabilities.
Cline said that these business initiatives are unlikely to have any significant impact on overall growth rates in the third or fourth quarters of this year.
"Serving our current customers is more important than ever; it is imperative that we maintain our current strong service levels and customer confidence in this period of undertaking new business initiatives," said Cline. "Therefore, we are managing capacity and productivity at levels required to maintain service, rather than take actions that would reduce operating costs but degrade customer service."
In another move to boost revenues -- and capture the growing e-commerce business-to-consumer shipping needs --Airborne introduced its Airborne@home service last year. With Airborne@home, Airborne delivers packages to U.S. Postal Service centers, which then deliver the packages to their final destinations.
Airborne said that growth in the Airborne@home product continues to build, and partially offsets the lag in core domestic product shipments. During the first part of September, Airborne shipped an average of approximately 32,000 units per day for the Airborne@home segment, which is on target with management's goals. In August, L.L. Bean became a customer for the Airborne@home service.
"The growth in our @home segment is encouraging, and we expect with the forthcoming holiday season an escalation of activity in this area," said Carl D. Donaway, president and chief operating officer at Airborne. "Under this new program we expect to deliver over 1 million packages for L.L. Bean in the first year."
Donaway also said that Airborne is evaluating additional products to target the growing e-commerce market. For example, over the next several months he said the company will develop an infrastructure to support its e-business strategy, with the goal of attracting more small-business and infrequent shipping customers through our online offerings.
"Currently we have a small market share in the small-business and infrequent shipper segment," said Donaway.
Another offering that Airborne is considering is bundling multiple services together, including ground services, to capture more air express business.
"Lack of ground service has put Airborne at a competitive disadvantage," said Donaway. "We are evaluating the introduction of a ground service product to complement our current air express products, and plan to compete in this sector by early second quarter 2001."