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Abx Air Inc. Swot Analysis

Essay by review  •  June 24, 2011  •  Case Study  •  1,243 Words (5 Pages)  •  1,140 Views

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STRENGTHS

LARGE AMOUNT OF SERVICES

ABX offers a large amount of services. The company runs a network of 19 hubs for DHL, providing package sorting and handling. ABX develops shipments ranging from individual letters to shipper-packaged pallets of electronic tools, retail catalogues, movies and pharmaceuticals.

Using aircraft, the company supports DHL in providing domestic express delivery services for cargo usually requiring next day delivery. The organisation also provides cargo transportation and aircraft-related services to customers other than DHL.

The company suggests ACMI and on-demand charter services to freight forwarders and other most important shippers. ABX puts up for sale aircraft parts through its wholly-owned subsidiary, Airborne FTZ, which is ASA 100 approved reseller and broker of aircraft parts. ABX also supplies maintenance and repair services and conducts flight-training services for its consumers. The company is a Federal Aviation Administration (FAA) official repair station. Moreover, the company runs a sorting facility for the US Postal Service and has also provided cargo transportation and sorting services to the US Postal Service. ABX has been leveraging its wide range of services to expand its client base.

GROWING NON-DHL BUSINESS

ABX has been focusing on expanding its sources of revenues and earnings, since its separation from Airborne in 2003.The company’s diversification strategy consists of selling charter/ACMI services and unused air cargo space to freight forwarders and shippers. In addition, ABX has been awarded agreements by the USPS to transport and sort mail. In September 2004, the company received a contract to run a sort facility for the USPS through September 2006.

During 2006 ABX’s non-DHL revenues increased by approximately 42.4% (inclusive of �All other’ revenues) compares to the financial 2005. Non-DHL charter revenues grew approximately by 76.3% over financial 2005 to $24.4 million in financial 2006. Also, for financial 2006 pre tax income from non-DHL charter operations were $3.7 million as compared to $1.1 million in 2005. The growing non-DHL business would expand the company’s revenue base.

WIDE RANGE OF OPERATIONS

In order to provide airlift capacity and sort facility staffing to DHL, ABX Air presents charter, maintenance and package handling services from a privately owned 2,000 acre airport that contains over 120 acres of paved ramp area, three aircraft maintenance hangars, two runways, and 1.24 million square feet of usable space in the sorting facility. ABX moves over 6 million pounds of freight to over 130 destinations throughout the US.

In 2005, the company acquired one extra Boeing 767 aircraft from Delta Airlines for $3.3 million and agreed to purchase eleven extra Boeing 767 aircraft from Delta through 2008 for an additional $35.8 million. The fuel efficiency, cubic capacity, payload and operating cost of Boeing 767 would provide ABX with a reasonable competitive advantage. The wide range of operation would help the company to achieve economies of scale and save cost. Moreover large scale gives the company an edge in the market.

WEAKNESSES

CONSUMER CONCENTRATION

ABX is heavily subordinate on DHL. In recent years, DHL, the company’s largest consumer accounted for main chunk of the company’s total revenues.

Increasing dependence on few customers would limit the company’s ability to conduct its operations in a flexible manner. For instance, ABX could experience declines in its revenues and operating cash flows as a result of volume decrease from DHL. In addition, DHL has placed increasing pressure on its vendors and services providers, including ABX, to reduce costs and improving efficiency in the aftermath of these losses.

SUBORDINATION ON US MARKET

ABX's revenue flow is highly dependent on the US air cargo market. In 2006, US accounted for nearly all of its revenues, representing that the organisation has a long way to go before it can establish itself as a global freight carrier. In particular, the company has a weak presence in growing markets like Asia and Europe.

High subordination on the US market doesn’t expose the company to economic performance.

OPPORTUNITIES

DEALS/CONTRACTS FROM THE USPS

ABX’s non DHL business has been growing as a result of latest contracts from the US Postal Services (USPS) in fiscal 2006. ABX Cargo Services was awarded a new four-year contract to deal with the USPS terminal handling services in Indianapolis, in September 2006.The new four-year contract expands ABX’s role through October 2010 and is projected to generate $17.7 million in extra revenues for ABX over its term. Under each of these contracts, the company was compensated at a firm price for fixed costs and an additional amount based on the level of mail handled at each

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