Airborne Express

Group Presentation by: The BravesSpring 2008

Agenda History & Background: Jennifer Smith

Industry Overview: Jennifer Smith

Business Strategy & Analysis:Ryan McNulty

Competitor Analysis: Pete Marcus

DHL Today!: Ryan McNulty

Conclusion & Recommendation:Pete Marcus

Airborne Express-An Overview

Headquarters-Originally Seattle, with a hub in Wilmington,OH

Formed by merger of 2 airfreight carriers (in 1968-Airborne Freight Corp)1. The Airborne Flower Traffic Assoc. of

California2. Pacific Air Freight

Airborne Express-An Overview Continued……

Service Offerings Letters and Packages

• Less than 1lbs to over 50 lbs. • Overnight, morning, afternoon, and 2nd day

deliveries

Target Customers-(Prior to the 1980’s)

Business customers-EX: Xerox, IBM, & catalog companies

Specifically ignored residential deliveries and infrequent shippers

Airborne Express-An Overview Continued

Shipments-900,000 packages & documents daily

Employees-12,700 full-time & 8,000 part-time employees

Fleet 13,300 Vans 175 aircraft (primarily purchase used

aircraft and refurbish them)

Industry-Overview Competitors-mergers and consolidations

common (suppliers saturated market) Technology-constantly changing Market

Products & Services-dynamic and easily imitable

Customer preferences-non-loyal, price consciencious, convenience, habits

Growth Opportunities• Domestic markets saturated, global opportunities

increasingly important.

Industry Revenues Trend-Revenues declining

1985-Revenue per shipment• Airborne-$19.37• Fedex- $19.19

1990-1991• Airborne- $11.43-10.78• Fedex- $16.76-17.33

1992-1997• Airborne- $11.43-10.78• Fedex- $16.76-17.33

Airborne Express- Business Strategies

Corporate Dominant Business diversification

Business Level Strategies Focused Cost Leadership

Strategy Analysis External & Internal Factors

• Technology• Market Share• Global Expansion• People/Culture• Marketing/Sales

Corporate Strategy Dominant-business diversification

Single Business• Majority of business

Shipping-95+%Warehouse Space Rentals-Less than 10%

Business Level Strategy Owned Airport Hub-Wilmington OH

• Reduced costs in landing fees, rental space• Increased revenues renting & landing fees

from other airline business customers Aircraft-filled to 80% capacity vs. Industry

• 65-70% Focused Cost leadership -

• Lowest costs-Used airplanes, outsourcing, pickup & delivery rates

• Different geographic markets- metro areas only

Focused Cost Leadership

Pricing Overnight, morning delivery rates

• Airborne-$10.95-80.70• Fedex- $13.86-86.86• UPS- $12.54-90.18

Overnight, afternoon delivery rates• Airborne-$9.25-80.70• Fedex- $12.04-82.54• UPS- $10.82-77.68*

Second-day delivery rates• Airborne-$6.25-58.00• Fedex- $8-54.89• UPS- $6.50-57.11

Focused Cost LeadershipOvernite, morning delivery

$0.00$20.00$40.00$60.00$80.00

$100.00

Lette

r 1 2 5 10 50

Weight

Pri

ce

Fedex

UPS

Airborne

Overnite, afternoon delivery

$0.00$20.00$40.00$60.00$80.00

$100.00

Lette

r 1 2 5 10 50

Weight

Pri

ce

Fedex

UPS

Airborne

Second-day delivery

$0.00$20.00$40.00$60.00$80.00

Lette

r 1 2 5 10 50

Weight

Pri

ce

Fedex

UPS

Airborne

Core Competencies & Resources

External Technology Market Share

Internal Factors People & Culture

Technology Airborne selectively invested in

technology, and let its rivals be forerunners

Customers could trace packages on their own, utilizing Airborne’s Freight On-Line Control and Update System (FOCUS)

Airborne’s website was not as sophisticated as it’s rivals Customers could only track packages, but not

schedule pickup or create shipping paperwork

Market Share Airborne was often overlooked

Many people used Fed Ex or UPS By 1997, market share grew faster

than Fedex and UPS Up to 16% of domestic express mail

market

People and Culture Employees described Airborne as “Straight-

laced,” “frugal,” and “very conservative” Top executives answer their own telephones,

shield away from interviews, and discourage fringe benefits

Company statements reflected modesty

Air borne Express -Financial Performance

$0

$1,000

$2,000

$3,000

1986 1990 1994

Years

Rev

enue

s

(

in m

illion

s)

Growth Trends-Outlook!

Growth Trends-1986-1997 Airborne Express-Revenues

1986-1989: $2573-5167• 101% increase

Airborne Express-Revenues 1990-1991: $7015-7688

• 9.6%*

Airborne Express-Revenues 1992-1997: $7550-11,520

• 50%

Global Expansion Only 6% ($78 Million) of Total Assets

were invested internationally Fed Ex -19% and UPS-12%

“There are no significant service advantages which would justify the operation of our own aircraft on international routes” Airborne used commercial airlines and

local partners for international shipping

Today- DHL DHL acquired Airborne Express August 14, 2003

Global company-headquartered in London (Deutsche Post World Net)

World’s largest international air express network Available to over 220 countries worldwide They own and operate the majority (2/3rds) of

offices worldwide This is far greater than their competitors

Faster transit times, smooth customs clearance, simplified billing, and effective shipping tracking are a result of dedicated personnel

Competitor Analysis Strengths

Concentration in metropolitan areas Owns airport Product Differentiation: 3 Ways

No Retail Service Centers Used Independent Contractors Cheaper but later delivery

OOPS

“ When it comes to technology, Airborne doesn’t add on bells and

whistles. We use our competitors as guinea pigs. Let them try out the new stuff and see what works”.

Strengths Concentration in metropolitan areas

Exploited Core competencies Owns airport

Product Differentiation: 3 Ways No Retail Service Centers Used Independent Contractors Cheaper but later delivery

Weaknesses Technology

Wages to their Employees

Efficiency and Reliability

Globalization

AnalysisYear 1986 FEDEX UPS AIRBORNE

Revenue 2,573 8,620 542

Net Income 132 669 13

Return on Equity 13.80% 29.80% 15.20%

Year 1996 FEDEX UPS AIRBORNERevenue 10,274 22,368 2,484

Net Income 308 1146 27

Return on Equity 12.80% 20.70% 6.50%

Change FEDEX UPS AIRBORNERevenue 399% 259% 458%Net Income 233.33% 171.30% 207.69%Return on Equity 92.75% 69.46% 42.76%

Conclusions Weaknesses counter-acted strengths

Metropolitan areas vs. Efficiency

Owns Airport vs. Globalization

Product Differentiation vs. Efficiency

Recommendations Be a leader not a follower

Stay ahead of the competition Know customers and what’s important to

them Keep low price differentiation but not at

expense of efficiency Continuous Improvement & Growth

Avoid being comfortable Search for different markets/geographic

locations