Five years after its US$1 billion acquisition of Airborne Express aimed at mounting a competitive threat to industry king-pins UPS and FedEx in the US domestic market, DHL Express has announced a major retreat that not only reduces its footprint in that market but enlists rival UPS for the air transport of its traffic.

The stunning about-turn consists of two major aspects ¨C a reduction of DHL’s ground infrastructure and the transfer of its intra-US express traffic that moves by air to UPS.

The two integrators have signed a 10-year contract under which DHL will pay its Atlanta-based rival US$1 billion a year for providing air lift.

DHL’s retrenchment on the ground will see its network capacity in the US shrink by 34 per cent. Pick-up and delivery routes will be trimmed by 17 per cent and truck line-haul routes by 18 per cent.

Deutsche Post will also phase out its existing agreements with two US cargo airlines, Ohio-based ABX Air and Miami-based Astar Air Cargo, who both now face a bleak future as the vast majority of their business is from their DHL line-haul contracts.

Fixing the air line-haul problem was a priority, according to John Mullen, head of global express. "Our network in the US is clearly uncompetitive and high cost," he said, pointing to foreign ownership restrictions, the use of two line-haul providers with a variety of ageing aircraft types and mixed container configurations.

Frank Appel, CEO of DHL parent Deutsche Post World Net, stressed that the agreement with UPS would not give any business away to DHL’s competitor. "We will be using UPS as an air-lift provider, just as we have used ABX Air and Astar so far," he said.

It’s not known how Deutsche Post plans to handle the connection between the group’s intra-US and international networks. Currently, Lufthansa Cargo and Northwest Airlines Cargo (to be replaced by Polar Air Cargo in October), run freighters into the DHL’s US hub in Wilmington, Ohio.