DHL set to invest in improvements at its Cincinnati/Northern Kentucky Airport hub

Express delivery and logistics services provider DHL said today that it plans to spend $22.5 million to expand its hub facility at the Cincinnati/Northern Kentucky Airport to meet the growing needs of international shippers.

In March, DHL said it will begin building on 19 acres of land leased from the CVG Airport Authority to expand its existing aircraft apron and construct nine new aircraft gates. They added that this will enable parking for nine additional wide-body aircraft that will connect the U.S. to points in Asia, Europe, and the Americas.

DHL moved its U.S. hub operations to CVG in July 2009. DHL’s U.S. business focuses on international import and export offerings in major metropolitan areas. It ceased U.S. domestic-only air and ground services at the end of January 2009, due largely to the ongoing uphill battle it faced competing with industry giants UPS and FedEx for market share.

A DHL spokesman told LM that this expansion was driven by the successful realignment of its business to focus exclusively on international services and growth in its import and export business, leading to “a need to continue to adjust its operation to meet the growing demands of international shipping customers.” The spokesperson added the CVG expansion positions DHL’s largest facility in North America for continued growth in package volume.

Company officials said this $22.5 million investment is the second phase of a two-year, $40 million investment geared to improve hub operations, including equipment upgrades and facility improvements. Construction will run through September 2011.

This follows an October 2010 announcement by the company, when it heralded a $12.5 million initiative to upgrade existing hardware and software applications running its auto sort system and improving the speed and reliability of its shipment scanning and sorting. CVG handles about 90 percent of all U.S.-bound DHL volume.

Even though DHL is increasing throughout and capacity at CVG, the spokesman said that the company will not return to serving the domestic U.S market like it previously did.

“For the U.S. market, we are the ‘Specialists in International; and will continue to focus exclusively on providing import and export services for customers that need to be connected to the global marketplace,” explained the spokesman.

While DHL maintains it will not return to serving the U.S. domestic market, a noted parcel expert told LM that may not be the case forever.

“As more and more corporations will be demanding a global logistics supply chain, DHL can’t ignore the US market, the largest transportation market in the world and hold itself out as a global player,” said Jerry Hempstead, president of Hempstead Consulting. “It just makes it too easy for FedEx and UPS to leverage their strength here.”

Hempstead went on to say that he suspects DHL may be contemplating doing some domestic service on a limited basis, explaining it has excess capacity in its terminals and on their trucks to do so without adding cost and being able to layer on incremental revenue.

“The marketplace would welcome their return as the memory of their [U.S. domestic service exit] is now more than 2 years old, and FedEx and UPS have been showing no mercy with their pricing increases. The price point is far higher than when DHL exited and there is no difference if a piece is moving from New York to Paris France or to Paris Texas other than one has to pass through customs.”

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