Saturday, June 26, 2004

Sweeteners, land moved DHL to pick Ohio for hub



By James Pilcher
Enquirer staff writer

Air carrier DHL confirmed Friday that it would consolidate its hub operations about 50 miles northeast of Cincinnati in Wilmington, ending a fierce battle between Ohio and Kentucky over hundreds of jobs.

chart DHL now employs 1,200 at its hub at the Cincinnati/Northern Kentucky International Airport in Erlanger, a number that will shrink to 300 full-timers by September 2005 as the company moves its operation to its Wilmington operation.

Ohio attracted DHL with an incentive package comprised of more than $100 million in roadbuilding and tax incentives, plus the state's guarantee backing a bond issue of up to $300 million.

It was still a tough decision, said Steve White, DHL's senior vice president for hubs and gateways.

"No doubt about it. Northern Kentucky has been a great place for us to operate for the last 20 years.

"But in the end, Wilmington was just so much bigger that it made sense to go there."

White said the Wilmington operation could handle seven times the volume, three times the total weight and three times the number of aircraft operations of Erlanger.

"It was costing us $160 million more a year to run redundant hubs, and we couldn't wait anymore," White said.

Severance offered

White said 800 jobs would be eliminated locally but that DHL was committed to adding 900 jobs in Wilmington, which already employs more than 6,000. He said the company has no plans to sell its sorting building that opened in August.

It is on the grounds of Cincinnati/Northern Kentucky Airport.

The 800 jobs are primarily part-time or full-time sorters who work overnight.

DHL Thursday sent letters to potentially affected employees, offering severance of up to 12 weeks' pay, depending upon experience, and a bonus of four weeks' pay to those who stay with the company until it stops the hub operation in Erlanger in September 2005.

Unknown is the status of the workers at Astar Air Cargo, the airline that carries DHL's freight. It employs more than 900 nationally, including more than 600 in Erlanger.

White also said the potential of more nighttime noise around the airport caused by more overnight flights from a bigger hub could have created issues both with the community and the company.

$300 million in bonds

The Brussels-based shipping giant, a subsidiary of Deutsche Post, has been contemplating which hub to use for more than a year, following its April 2003 purchase of most of Airborne Express for $1.05 billion. That purchase, made to challenge UPS and FedEx, included the Clinton County operation but created a separate company. ABX Air Inc. now operates an airline and runs the hub on behalf of DHL.

The move sparked a major bidding war between Kentucky and Ohio, with both states offering incentive packages to keep the thousands of jobs at stake.

Ohio's winning package included $300 million in government-backed tax-exempt bonds. The state guarantee allows the company to shop for interest rates lower than normal. The rest of the package included tax incentives.

Additionally, the state promised to accelerate the construction of an already planned bypass around Wilmington. The Ohio Department of Transportation will take over the design and construction of the proposed project from Clinton County. Since the path of the bypass has not been set, no cost figures have been created for the new highway.

In return, DHL promised to invest $295 million in its Wilmington hub and create 600 new full-time and 300 new part-time jobs. Overall, the consolidation will cost the company $350 million, DHL officials said.

It's part of a $1.2 billion plan announced Friday that includes seven new regional hubs in as-yet-unspecified sites throughout the country.

The results would have been "devastating" to Clinton County had the hub gone to Erlanger, said Joe Hete, president and chief operating officer for ABX Air, the company that flies DHL freight out of Wilmington and operates the hub there.

"It would have been our worst nightmare, especially after the community already went through that back in 1972 when the military pulled out," Hete said. The Clinton County complex sits on a former U.S. Air Force base just east of the Wilmington city limits.

Noise study in question

Kentucky officials would not divulge the amount of their offer to keep the operation in Erlanger.

"I had a chance to talk to management at DHL extensively (Friday) morning, and despite our best efforts, there never really was a fierce competition between Ohio and Kentucky," said Danny Fore, president of Northern Kentucky Tri-County Economic Development Corp., the region's job recruitment agency that was intimately involved with Kentucky's effort to land DHL. But other sources close to the negotiations said the effort was more robust.

Airport spokesman Ted Bushelman said DHL paid $2.2 million in landing fees last year, a figure that will eventually shrink to virtually nothing.

"But that's only 2.6 percent of our budget, so that is easily corrected," said Bushelman, who pointed out that the company will still pay off $230 million in bonds issued on its behalf through the airport in 2002.

DHL officials also said they had met the obligations required when the company received incentives to build the new building at the airport. One issue left hanging was the status of the airport's ongoing $1.2 million noise study, which was started in part because of residents' complaints about an increase in late-night flights.

.

"I'm not unhappy to hear that they aren't going to expand here," Oakbrook resident John Bales said. "I'm happy that it's not going to increase the noise level for a lot of people around here ... but I'm not happy for people who may lose their job."

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Enquirer staff writers Patrick Crowley and Brenna Kelly contributed.

E-mail jpilcher@enquirer.com




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