Airborne Moves to Spur Growth, Earnings

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Airborne Inc., a package express company specializing in the business-to-business market, is taking steps to combat the lack of core domestic business growth that affected 2000 earnings and contributed to a first-quarter 2001 loss.

Airborne reported a loss of $17 million for the first quarter, which ended March 31, compared with earnings of $17.9 million in the same quarter a year earlier. Airborne executives attributed the loss to the sluggish economy and the shift in its business mix during the first quarter.

Airborne, Seattle, which is the holding company for Airborne Express, said growth initiatives include:

• This month's debut of a nationwide ground delivery service to improve the company's competitive position.

• A new pricing structure that includes a rate increase and a migration to zone-based pricing to boost operating yields, both of which are being phased in throughout the year.

• Expansion of the sales force and enhanced sales training and incentives to increase shipment volume and gain new business.

• The addition of e-commerce and marketing alliances to attract the small-business and infrequent-shipper markets.

Airborne Express' ground delivery service, which it began on a limited basis this month, will handle 15,000 daily shipments initially. It will offer the same benefits as Airborne's express services, including shipment tracking and customer automation options. The pricing of the deferred one- to five-day delivery service will be zone-rated, which is consistent with industry standards.

Critical to the successful implementation of Airborne's ground delivery service was the recent negotiation of a special addendum to the labor agreements with the Teamsters union and the subsequent approval of that addendum by an overwhelming margin in a nationwide ratification vote among Airborne employees.

Airborne expects capital investments for the ground delivery service to be less than $30 million in 2001. The company is targeting an average per-day shipment volume of 15,000 units by the end of the first three months of service, with incremental growth as new customers are added.

Carl Donaway, president/CEO of Airborne Express, said the company decided to offer the less expensive alternative to its air delivery service in response to competition from rivals United Parcel Service and Federal Express.

Airborne unveiled its ground service plans in September as part of a package of new business initiatives aimed at reversing its flagging fortunes.

Airborne will continue to offer Airborne@Home, which combines Airborne's transportation network with the residential delivery shipping abilities of the U.S. Postal Service, providing seamless delivery from virtually any business to any residential destination in the United States. Airborne is taking advantage of work-sharing discounts that the USPS has extended to bulk-rate mailers that presort by ZIP code and deliver parcels directly to sorting centers.

Also this week, Airborne Express announced a new 10:30 a.m. next-day express delivery option with a performance guarantee.

Airborne customers requiring earlier delivery than Airborne's current next-morning by noon express deadline may now choose the earlier 10:30 a.m. option, with a guarantee that they will be billed the $5 surcharge only when their package is delivered by 10:30 a.m.

"Our employees' performance in meeting our regular next-morning by noon express delivery deadline has been so exceptional that we can confidently offer this unprecedented guarantee," Donaway said. "We know we can deliver on our promise for this new service without incurring any substantial additional operating costs."


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