Airborne Inc., the holding company for Airborne Express, will institute a rate increase in a few weeks because the slowing economy negatively affected core domestic product growth in the fourth quarter.
However, Airborne said this week that overall domestic shipments grew more than 3.5 percent for the quarter compared to the fourth quarter a year ago due to the exceptional growth in its [email protected] product
[email protected] is a business-to-consumer residential deferred-delivery service that stems from a partnership between Airborne Express and the U.S. Postal Service. It allows Airborne to transport shipments using its sort hub network to one of more than 24,000 USPS destination delivery units within three to four days. Postal carriers then deliver the packages to their residential destinations the next day. They can be tracked from the factory loading dock to the delivery units through Airborne's tracking system and ultimately to the customer through the USPS delivery confirmation service.
“Overall shipment volume increased in the fourth quarter due to excellent growth for the @home service, which helped push fourth quarter revenues above third-quarter levels,” Airborne chairman/CEO Robert Clien said.
But, he said, “Our higher-yielding core product volume declined as a result of the economic slowdown affecting the entire industry. As a result, the overall product mix and added costs associated with severe winter weather, higher fuel costs and extended holiday service hampered our goal of returning to positive operating earnings in the fourth quarter.” Based on preliminary assessments, he estimated Airborne will report a loss 23 to 33 cents a share in the fourth quarter.
For 2000, Airborne estimates net operating earnings of 21 to 31 cents per share. The company will issue final results for the fourth quarter and fiscal year on Jan. 31.
In the fourth quarter, shipments through [email protected], the company's business to consumer shipment product, exceeded management's goal of 65,000 shipments per day.
“Average per day shipments during the fourth quarter, boosted by exceptional customer demand during the holiday season, reached approximately 87,000 for the @home product. However, due to the greater than anticipated volume, we incurred additional costs in fulfilling the service requirements of customers, leading to increased operating costs in the quarter,” said Lanny Michael, chief financial officer. “Also, fuel in the fourth quarter climbed to even higher levels than the previous quarter. We estimate jet fuel costs for the quarter averaged $1.18 per gallon, which is 49% higher than last year's fourth quarter,” Michael said.
“In the next few weeks, we will announce a rate increase as part of our yield management initiatives,” said Carl Donaway, president and chief operating officer. “This is intended to increase revenues, while still keeping our products competitively priced. We expect to implement a rate increase on an estimated one-third of our domestic business by February 15 and will phase in rate increases on most of the remainder of the domestic business over the next several quarters. Additionally, we intend to refine the pricing of our @home product to more accurately match the service levels involved in the delivery of that business.”