Higher Expenses Lead Airborne to Warn of Q1 Loss

Airborne Inc. said yesterday that it expects to post a quarterly loss because of higher operating expenses and costs related to its merger with DHL Worldwide Express.

Though the No. 3 shipping company saw a rise in U.S. ground shipping volume, bad winter weather, escalating fuel costs and increased corporate costs contributed to unforeseen expenses. As a result, Airborne said it expects to report a net loss of 12 cents to 17 cents a share for the first quarter. Analysts expected a profit of 9 cents a share.

Domestic shipment volumes increased 3.5 percent in the first quarter, thanks to gains in Airborne's ground delivery service, but volume for its air express operation dropped 8 percent.

The Seattle-based company said its average fuel costs were $1.21 a gallon last month and $1.12 a gallon for the first quarter. Last year, gas prices averaged 71 cents a gallon. Also, Airborne's pension and insurance costs increased $5 million and its legal fees rose $6 million because of the planned sale of its ground operations to Deutsche Post for $1.05 billion.

Airborne's earnings warning comes less than a month after it reached a merger agreement with Deutsche Post, which hopes to combine Airborne's ground unit with its DHL Worldwide Express subsidiary. Reuters reported yesterday that the earnings shortfall already had been disclosed and would not affect the deal.

United Parcel Service and FedEx Corp. have lobbied to stop the merger, claiming Deutsche Post's ownership of DHL Worldwide violates U.S. laws related to foreign company ownership of domestic airlines. Deutsche Post has a 25 percent stake in DHL Airways, the maximum allowed under U.S. law.

On Saturday, Congress asked regulators to take a closer look at DHL Airways' ownership structure.

Airborne plans to report its Q1 results April 30.

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