Airborne Express By: Ganymede Team Spring 2008

Introduction Background Background Unique Approach and Current Operations Unique Approach and Current Operations Major Comparisons to Rivals Major Comparisons to Rivals Current News with Airborne Current News with Airborne Future Questions for Airborne Future Questions for Airborne Recommendations Recommendations Airborne Today; 2008 Airborne Today; 2008

Airborne’s Background Airborne Express is a express mail and cargo delivery company Airborne Express is a express mail and cargo delivery company It is the third largest after FedEx and UPS It is the third largest after FedEx and UPS Airborne was founded as the Airborne Flower Traffic Association of California in 1946 to fly flowers to the state of Hawaii. Airborne was founded as the Airborne Flower Traffic Association of California in 1946 to fly flowers to the state of Hawaii. Airborne Express developed special narrow containers which allows the use of passenger jet aircraft without needing a large cargo door modification. Airborne Express developed special narrow containers which allows the use of passenger jet aircraft without needing a large cargo door modification. It’s headquartered in Seattle, Washington, with its own airport hub at Wilmington, Ohio. It’s headquartered in Seattle, Washington, with its own airport hub at Wilmington, Ohio.

Airborne’s Unique Approach Airborne Express targets the business customers that regularly ships large volume of urgent items Airborne Express targets the business customers that regularly ships large volume of urgent items They purposely pass over residential and infrequent shippers They purposely pass over residential and infrequent shippers Airborne tailors to specific business needs Airborne tailors to specific business needs Vice president, Ray Barry, said, Vice president, Ray Barry, said, “The customers needs we have targeted to fill are what we are best at. If we had large order customers requiring nothing but residential deliveries, we might be able to serve them as as well as we know how to. Since we can’t be all things to al people, we pick our kind of customer deliberately.”

Airborne’s Current Operations Airborne has 13,300 vans, fleet of 175 aircrafts 12,700 full-time and 8,000 part-time employees Airborne has 13,300 vans, fleet of 175 aircrafts 12,700 full-time and 8,000 part-time employees Airborne owns the airport that serves as its major hub, which is unique from other express mail companies Airborne owns the airport that serves as its major hub, which is unique from other express mail companies It does not have to pay landing fees It does not have to pay landing fees It dos not have to tailor to other facility needs It dos not have to tailor to other facility needs If has to maintain the airport If has to maintain the airport And it does not share other expenses with other airlines And it does not share other expenses with other airlines

Airborne’s Current Operations Airborne buys used aircrafts and modifies them Airborne buys used aircrafts and modifies them Modifies passenger doors to fit Airborne’s cargo containers Modifies passenger doors to fit Airborne’s cargo containers Airborne does not does not require large cargo doors to transport cargo Airborne does not does not require large cargo doors to transport cargo Shippers and recipients were heavily populated in metropolitan areas Shippers and recipients were heavily populated in metropolitan areas Airborne uses independent contractors to handle 60-65% of Airborne’s volume Airborne uses independent contractors to handle 60-65% of Airborne’s volume

Technology and Marketing Major software is Freight On-Line Control and Update System (FOCUS) Major software is Freight On-Line Control and Update System (FOCUS) Allows customers to trace packages and submit shipping information Allows customers to trace packages and submit shipping information Not as advanced as its rivals Not as advanced as its rivals Targets major shippers via 500-person sales force Targets major shippers via 500-person sales force Does not advertise in mass media Does not advertise in mass media

Major Comparisons Airborne has its own airport Airborne has its own airport Airborne has unique planes Airborne has unique planes Airborne targets the business customers that regularly ships in bulk Airborne targets the business customers that regularly ships in bulk Airborne tailors to specific business needs Airborne tailors to specific business needs Used independent contractors for 60-65% of the deliveries Used independent contractors for 60-65% of the deliveries

Airborne’s Strengths Airborne has its own airport hub Airborne has its own airport hub Airborne’s planes were usually 80% full Airborne’s planes were usually 80% full Airborne picked up and delivered more parcels per stop Airborne picked up and delivered more parcels per stop Saved 30% between pick-up and drop-off costs Saved 30% between pick-up and drop-off costs Airborne tailors to specific business needs Airborne tailors to specific business needs Greater portion of Airborne’s deliveries were afternoon and second-day deliveries Greater portion of Airborne’s deliveries were afternoon and second-day deliveries Allowing them to use more trucks more often Allowing them to use more trucks more often This saves Airborne over 50% in delivery costs This saves Airborne over 50% in delivery costs

Airborne’s Weaknesses Airborne does not express a lot of residential Airborne does not express a lot of residential Airborne only guarantees overnight deliveries by noon the next day (rivals guarantee by 10:30am) Airborne only guarantees overnight deliveries by noon the next day (rivals guarantee by 10:30am) Only 96% of Airborne’s arrive on time Only 96% of Airborne’s arrive on time FedEx and UPS are 99% or higher FedEx and UPS are 99% or higher Software is not nearly has advanced as rivals Software is not nearly has advanced as rivals Marketing is not as aggressive as rivals Marketing is not as aggressive as rivals

Airborne and RPS? Roadway Package System (RPS) is a strong ground delivery company Roadway Package System (RPS) is a strong ground delivery company Airborne is forming a good relationship with Roadway Package System Airborne is forming a good relationship with Roadway Package System RPS targets the large ground transport needs of large-volume business customers RPS targets the large ground transport needs of large-volume business customers Putting a dent in UPS’s traditional customer base Putting a dent in UPS’s traditional customer base This could be setting up for a very good and strategic merge to compete better with rivals This could be setting up for a very good and strategic merge to compete better with rivals

Current Events UPS went on strike UPS went on strike Airborne is forming a good relationship with Roadway Package System (RPS) Airborne is forming a good relationship with Roadway Package System (RPS) Airborne recently had revenues up by 29% over the last quarter Airborne recently had revenues up by 29% over the last quarter UPS and FedEx turned toward distance-based pricing UPS and FedEx turned toward distance-based pricing

The Future of Airborne Is Airborne’s position secure? Can it compete with UPS & Federal Express in the long-run? Is the RPS partnership important? Should Airborne move to distance-based pricing? Further recommendations…

Airborne & the “900-Pound Gorillas” With UPS workers on strike and Airborne’s terrific financial results, its future is looking very bright. With UPS workers on strike and Airborne’s terrific financial results, its future is looking very bright. However, since UPS is such a giant in the industry, one move requires Airborne’s full attention & immediate action. However, since UPS is such a giant in the industry, one move requires Airborne’s full attention & immediate action. Should Airborne be worried about an acquisition by UPS…? The answer is NO. Should Airborne be worried about an acquisition by UPS…? The answer is NO.

Airborne & the “900-Pound Gorillas” Federal Express has heavy-weight power, but is it enough? Federal Express has heavy-weight power, but is it enough? FedEx recently raised its prices – a plus for Airborne. FedEx recently raised its prices – a plus for Airborne. Airborne’s potential is a major threat to FedEx, thus Airborne is not worried. Airborne’s potential is a major threat to FedEx, thus Airborne is not worried.

Airborne and RPS…Partners? Is the relationship to RPS crucial to Airborne’s future? Is the relationship to RPS crucial to Airborne’s future? What can RPS and Airborne do for each other? What can RPS and Airborne do for each other? YES, RPS can help Airborne cut into UPS’s traditional customer base with its ground transport. Airborne will get use of RPS’s info and tracking capabilities & RPS will get appeal & name recognition.

Distance-Based Pricing…A Good Move? In 1996 UPS changed its prices to reflect the distance of the parcel. In 1996 UPS changed its prices to reflect the distance of the parcel. In 1997, FedEx made the same changes – charging more for packages that travel farther In 1997, FedEx made the same changes – charging more for packages that travel farther Will it work for Airborne? Will it work for Airborne? Customers are expecting this change simply as an industry trend, so YES. Customers are expecting this change simply as an industry trend, so YES.

Further Recommendations Competition comes from unexpected places; keep an eye on the Postal Service because they have done very well during the strike at UPS. Competition comes from unexpected places; keep an eye on the Postal Service because they have done very well during the strike at UPS. Be aware of future moves by UPS because they will definitely try to recoup some of that lost volume. Be aware of future moves by UPS because they will definitely try to recoup some of that lost volume.

Further Recommendations Cont. In order to continue healthy growth over the years, Airborne should consider an alliance or merger with RPS. In order to continue healthy growth over the years, Airborne should consider an alliance or merger with RPS. Globalization: Further expand investments into overseas & global shipping; Do Not allow competition to get too ahead of you. Globalization: Further expand investments into overseas & global shipping; Do Not allow competition to get too ahead of you.

Airborne Today; Since Airborne entered the Fortune 500 list for the first time Airborne entered the Fortune 500 list for the first time an alliance with the United States Postal Service, was formed an alliance with the United States Postal Service, was formed Carl Donaway became the company's new president, which lead to many managerial changes. Also that year, Airborne started a ground service for the first time in its history Carl Donaway became the company's new president, which lead to many managerial changes. Also that year, Airborne started a ground service for the first time in its history Airborne Express launched Ground Delivery Service and 10:30am Delivery Service. Airborne.com launched some services of its own, including the Small Business Center and Airborne eCourier Airborne Express launched Ground Delivery Service and 10:30am Delivery Service. Airborne.com launched some services of its own, including the Small Business Center and Airborne eCourier. August 14, Airborne shareholders approved August 14, Airborne shareholders approved the acquisition of Airborne, Inc. by DHL of Brussels, Belgium. The acquisition became effective the next day. DHL retained ownership of Airborne's ground operations and spun off its air operations as ABX Air, Inc. The acquisition became effective the next day. DHL retained ownership of Airborne's ground operations and spun off its air operations as ABX Air, Inc.