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ABX Air, Inc. - Category Directory
145
Hunter Drive
Wilmington, OH 45177
937-382-5591
www.abxair.com
Sales
$1.2
billion
Business Description
ABX
Air, Inc. (“ABX”) is a Delaware corporation that was formed in 1980 and was
recently a wholly-owned subsidiary of Airborne, Inc. (“Airborne”). On August
15, 2003 we were separated from Airborne and became an independent,
publicly-owned company. We are an airline providing air cargo transportation
and hub services within the United States and to Canada and Puerto Rico. We
operate and maintain an in-service fleet of 115 aircraft. Through a network
of 12 hubs in the United States, we provide package sorting and handling
services. We utilize contracted line-haul from third party trucking
companies to transport deferred delivery cargo within our network. Deferred
delivery cargo must be delivered at a specific time, but is less time
sensitive than express freight typically transported by our aircraft. We do
not provide local pickup and delivery services to consumers. Our
headquarters and the principal site of our airline hub and package sorting
operation are located in Wilmington, Ohio.
Since our inception, Airborne has been our primary customer, accounting for
over 98% of our annual revenues. We assist Airborne in providing domestic
express and deferred delivery services to its customers. Airborne’s express
delivery services include its Overnight Service, Next Afternoon Service
(“NAS”) and Second Day Service (“SDS”). Overnight Service and NAS packages
are primarily transported by our fleet of aircraft and sorted through our
nightly hub operations. SDS packages and packages shipped using Airborne’s
deferred delivery services, which include Airborne@Home and Ground Delivery
Service, are primarily transported by contracted trucks and sorted through
our Wilmington daytime sort and regional hub operations. Some of the
packages for SDS and for deferred delivery services may be transported on
our aircraft.
We also provide air transportation services such as on-demand charter
services and airport-to-airport freight transportation on a space available
basis. We sell aircraft parts and provide maintenance and repair services
for airframes and aircraft components. We also provide flight-training
services to customers.
Products and Services
Beyond the ACMI and hub services that we provide to Airborne, we also
provide air transportation and related service to other customers. The chart
below represents the distribution of our revenues based on our activities in
the fourth quarter of 2003.
Our strategy is to increase our customer base through the development of air
transportation related services and by leveraging our current air cargo
capabilities. Our services provided to non-Airborne customers, are described
below.
ACMI and On Demand Charter Services
We can use our aircraft to fly charters for customers other than Airborne. A
typical charter contract requires ABX to supply the aircraft, crew,
maintenance and insurance for specified cargo operations, while the customer
is responsible for substantially all other aircraft operating expenses,
including fuel, landing fees, parking fees and ground and cargo handling
expenses. Under a charter arrangement, we have exclusive operating control
of our aircraft and our customers must typically obtain any government
authorizations and permits required to service the designated routes. This
model allows customers to utilize our capabilities instead of committing to
aircraft ownership. Throughout 2003, we performed scheduled weekly flights
for customers operating from Miami, Florida to several cities in the
Caribbean and Central America.
Airport-to-Airport Transportation of Freight on a Space Available Basis
Our ACMI agreement with Airborne allows us, subject to certain limitations
described in the ACMI agreement, to sell any aircraft space that Airborne
does not use to other customers. On the routes we operate for Airborne, we
sell airport-to-airport transportation services to freight forwarders and we
have a contract to provide such services to the U.S. Postal Service.
Aircraft Maintenance and Modification Services
We are a Federal Aviation Administration (“FAA”) certified repair station
and we can leverage the maintenance facilities (including hangars and a
component shop which we lease) and our engineering capabilities to perform
airframe and component maintenance and repair services for other airlines
and maintenance repair organizations. We have developed technical expertise
related to aircraft modifications as a result of our long history in
aviation. We own many Supplemental Type Certificates (“STC’s”). An STC is
granted by the FAA and represents an ownership right, similar to an
intellectual property right, which authorizes the alteration of an airframe,
engine or component. Historically, we have not marketed these capabilities,
but as we identify opportunities in the market, we will attempt to match our
capabilities with market needs.
We perform airframe overhauls on our fleet of McDonnell Douglas DC-9
(“DC-9”) aircraft and line maintenance on our fleet of McDonnell Douglas
DC-8 (“DC-8”), DC-9 and Boeing 767 aircraft. We also refurbish in-house
approximately 60% of the airframe components for our DC-8 and DC-9 aircraft
and the wheels and brakes for all of our aircraft types. We also perform
intermediate repairs on the engines for our DC-8 aircraft and the engines
and auxiliary power units for our DC-9 aircraft. We have developed a turnkey
approach for installing FAA certified Reduced Vertical Separation Minima (“RVSM”)
equipment in DC-9 aircraft and signed an exclusive distribution agreement to
sell the related hardware. RVSM is designed to reduce air traffic congestion
by permitting aircraft to fly closer together vertically above certain
altitudes. Additionally, we update aircraft manuals for customers in
conjunction with the modification of aircraft from passenger to cargo
configuration.
Aircraft Parts Sales and Brokerage
Our wholly-owned subsidiary, Airborne FTZ Inc. (“FTZ”), which holds a
certificate relating to free trade zone rights, is an ASA (Aviation
Suppliers Association) 100 Certified reseller and broker of aircraft parts.
FTZ carries an inventory of DC-8, DC-9 and Boeing 767 spare parts, and also
maintains inventory on consignment from original equipment manufacturers,
resellers, lessors and other airlines. FTZ’s customers include the
commercial air cargo industry, passenger airlines, aircraft manufacturers
and contract maintenance companies serving the commercial aviation industry,
as well as other resellers.
Flight Crew Training
We train flight crewmembers in-house utilizing our own classroom instructors
and facilities. We own four flight simulators, including one Boeing 767, one
DC-8 and two DC-9 flight simulators. Our Boeing 767 and one of our DC-9
flight simulators are level C certified, which allows us to qualify flight
crewmembers under FAA requirements without performing check flights in an
aircraft. Our DC-8 and the other DC-9 flight simulator are level B certified
which allows us to qualify flight crewmembers by performing a minimum number
of aircraft flights. We are FAA certificated to offer training to customers
and rent usage of the flight simulators for outside training programs.
Industry
The air cargo delivery industry provides time definite delivery services,
usually for time critical or priority shipment. Transported shipments range
from individual letters to shipper-packaged pallets of material such as
electronic equipment, retail catalogs, movies and pharmaceuticals. The
principle competitive factors in our industry are price, geographic
coverage, flight frequency, reliability and capacity.
Cargo volumes within the U.S. are highly dependent on the economic
conditions and the level of commercial activity. We expect the market to
grow over the long term as the U.S. economy recovers. Continued emphasis
among businesses for just-in-time inventory management and time critical
delivery services increases the demand for air cargo delivery. Historically,
ABX and our industry have experienced higher cargo volumes during the fourth
calendar quarter of each year.
The industry has been and is expected to remain highly competitive primarily
because of excess capacity among U.S. airlines. We compete for domestic
cargo volume principally with other all-cargo airlines, integrated carriers
and passenger airlines which have substantial belly cargo capacity. Other
all-cargo airlines include Astar Air Cargo, Inc. (“Astar”), (formerly DHL
Airways), Atlas Air Inc., Evergreen International Inc. and Kitty Hawk Inc.
Integrated, (door-to-door) carriers include Federal Express Corporation
(“FedEx”) and United Parcel Service Inc. (“UPS”). At least two of our
competitors have an ACMI or charter agreement with a DHL affiliated company.
Our air transport capabilities also compete with expedited ground delivery
services utilizing trucks. Shippers may be able to utilize expedited ground
delivery on short-haul routes where expedited services are available,
typically from integrated and less-than-truckload carriers. Generally, the
cost of truck-transported freight is substantially less than air
transportation.
Airline Operations
Aircraft
We currently utilize pre-owned Boeing 767, DC-8 and DC-9 aircraft. Once
acquired, aircraft are modified for use in our cargo operation. As of
December 31, 2003, our in-service fleet consisted of 115 aircraft, including
twenty-four Boeing 767, seventeen DC-8, and seventy-four DC-9 aircraft. We
own 109 of these aircraft and lease five Boeing 767 and one DC-9 aircraft.
The average age of our Boeing 767, DC-8 and DC-9 aircraft is 20, 35 and 33
years, respectively.
With newer generation and more operationally efficient Boeing 767 aircraft,
the less economical DC-8 aircraft can be placed into shorter lane segments,
transferred to backup or charter operation roles, or removed from service.
Future DC-8 aircraft retirements will be determined based on ACMI
requirements, capacity requirements, charter service demand and the timing
of placing future Boeing 767 aircraft into service.
The majority of our aircraft are not equipped with a standard cargo door,
but instead utilize the former passenger door for the loading and unloading
of freight. This reduces the cost of modifying the aircraft from passenger
to cargo configuration, but limits the size of the freight that can be
carried onboard the aircraft and necessitates the use of specialized
containers and loading equipment. The absence of a cargo door also
negatively impacts the market value of the aircraft. We currently have eight
DC-8 aircraft that are equipped with an activated standard cargo door. We
also have nine DC-9 aircraft that are equipped with a standard cargo door
that are currently not activated. We are currently modifying two Boeing 767
aircraft with a standard cargo door and plan to install standard cargo doors
on three Boeing 767 aircraft that we are committed to purchase in 2004 and
2005.
Flight Operations and Control
Our operations (including aircraft dispatching, flight tracking and crew
scheduling) are planned and controlled by dispatch and flight operations
personnel at the Wilmington Air Park, an airport located in Wilmington,
Ohio. We staff the flight operations office 24 hours per day, 7 days per
week. Our flight operations office at Wilmington Air Park also coordinates
the technical support necessary for our flights into other airports. Because
our flight operations can be hindered by inclement weather, we use
sophisticated landing systems and other equipment that are intended to
minimize the effect that weather may have on our flight operations.
Maintenance
Our operations are regulated by the FAA for aircraft safety and maintenance.
We believe that maintaining a majority of our fleet of aircraft ourselves
reduces maintenance costs, minimizes the out-of-service time for aircraft
and achieves a higher level of reliability. We are certificated as an FAA
repair station to perform maintenance on DC-8, DC-9 and Boeing 767 aircraft
and their related avionics and accessories. Our maintenance and engineering
personnel coordinate all routine and non-routine maintenance programs. Our
maintenance programs include tracking the maintenance status of each
aircraft, consulting with manufacturers and vendors about procedures to
correct irregularities and training ABX maintenance personnel on the
requirements of our FAA-approved maintenance program. We conduct nearly all
of our own maintenance training.
We perform major airframe maintenance and modification on our DC-9 aircraft.
We perform routine inspections and airframe maintenance, including
Airworthiness Directives and Service Bulletin compliance on our DC-8, DC-9
and Boeing 767 aircraft. We contract with maintenance repair organizations
to perform heavy maintenance on DC-8 and Boeing 767 airframes. We also
contract with maintenance repair organizations for the performance of heavy
maintenance on aircraft engines.
We own a supply of spare aircraft engines, auxiliary power units (“APUs”),
aircraft parts and consumable items. The number of spare items we maintain
is based on the size of the fleet of each aircraft type we operate and the
reliability records of the item types. These serviceable spare engines, APUs,
spare parts and consumable items are used strictly in support of our fleet
of aircraft.
Due to the nature of ABX’s business, our aircraft experience relatively low
utilization. For this reason, we have elected to schedule and perform heavy
maintenance on our aircraft on a calendar basis as opposed to an hourly
basis. This results in ABX’s aircraft undergoing inspections and maintenance
on a more frequent basis, thereby improving mechanical reliability, lowering
costs and, ultimately, improving service to our customers.
Insurance
We are required by the Department of Transportation (the “DOT”) to carry
liability insurance on each of our aircraft. Each of our aircraft leases and
the ACMI and Hub Services agreements also require us to carry such
insurance. We currently maintain public liability and property damage
insurance and aircraft hull and liability insurance for each of the aircraft
in our fleet in amounts consistent with industry standards.
Sort and Line-haul Operations
We operate and maintain Airborne’s primary sort facility located in
Wilmington, Ohio. The Wilmington facility currently has the capacity to
handle approximately 1.3 million pieces during the primary 3.25-hour nightly
sort operation. On average, approximately 930,000 pieces are sorted each
weekday night at the sort center. In addition to the sort facility in
Wilmington, we operate eleven regional hubs on behalf of Airborne that are
located near Allentown, Pennsylvania; Atlanta, Georgia; Centralia,
Washington; Columbia, Missouri; Fresno, California; Orlando, Florida;
Providence, Rhode Island; Roanoke, Virginia; South Bend, Indiana; Vista,
California; and Waco, Texas. These regional hub facilities primarily sort
shipments originating and having a destination within approximately 250
miles. We also conduct a daytime sort operation in Wilmington that processes
deferred delivery services. The day sort generally receives shipments
through a combination of aircraft and trucks originating from regional hubs,
Airborne station facilities or customer sites. .
Air Couriers in the Directory
BAX Global
ABX Air
FedEx
UPS
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