DHL Worldwide Express

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DHL Worldwide Express

333 Twin Dolphin Dr.
Redwood City, CA 94065
U.S.A.
(415) 593-7474
Fax: (415) 593-1689

Private Company
Incorporated: 1969 as DHL Worldwide Express
Employees: 20,000
Sales: $2.3 billion

DHL Worldwide Express, a privately held worldwide delivery service, is the world’s oldest and largest international air-express company. Since 1969, when it began as an air-courier service from California to Hawaii, the firm has grown to cover almost every country in the world and has inspired many other such companies to enter this profitable industry.

DHL was founded by three young shipping executives— Adrian Dalsey, Larry Hillblom, and Robert Lynn—who were casting about for a way to increase turnaround speed for ships at ports. They reasoned that if the shipping documents could be flown from port to port, they could be examined and processed before the ships arrived, and speeding up the process would decrease port costs for shippers. With this in mind, the trio combined the first letters of their last names to form the acronym DHL, thus beginning an air-courier company that would revolutionize the delivery industry.

DHL rapidly developed into an express delivery service between California and Hawaii, then quickly expanded to points east. The company’s primary customer was the Bank of America, which needed a single company to carry its letters of credit and other documents. DHL branched into the international market in the early 1970s when it began flying routes to the Far East. And while competitor Federal Express was developing its domestic overnight delivery network, DHL focused on further developing its international service.

In 1972, the three original investors recruited Po Chung, a Hong Kong entrepreneur, to help them build a global network. Chung started DHL’s sister company, DHL International Ltd., headquartered in Brussels, Belgium. Since that date DHL Worldwide has functioned as two separate companies, DHL Corp.—the national branch based in Redwood City, California, of which DHL Airways is the main subsidiary—and DHL International. While each company acted as the exclusive agent for the other, by 1983 DHL International had grown to be five times larger than its domestic counterpart. DHL’s rapid expansion continued throughout the 1970s, especially in the Far East. In 1979 DHL Worldwide cracked the growing Japanese market and, for a few years, had the market to itself.

The 1980s would bring the firm increased growth as well as greater competition. During this time DHL would continue to expand, by turns cooperating with competitors and warring with them. The company also sought new outlets for service, thus DHL worked out an arrangement with Hilton International Co. in 1980, agreeing to provide daily pickup of documents at 49 Hilton Hotels, arranging for international delivery—its couriers moving the packages through customs—then delivering them locally. Therefore, Hilton was able to offer its patrons a high-class delivery service, and DHL was guaranteed new outlets for its business. In 1981 DHL flew 10 million shipments between 268 cities. That year DHL Corp., alone, had approximately $100 million in sales. The following year, Lawrence Roberts, who had founded Telenet Communications Corp. and headed GTE, joined DHL Corp. as president.

Though DHL had a strong international presence, business was occasionally made difficult because it was necessary for the company to negotiate with foreign governments. In 1982, for example, the French post office sought to reassert a monopoly dating back to the 15th-century, and DHL—possessing 80 percent of the French market—was ordered to halt operations outside Paris. What could have been a potential crisis for the company was, however, favorably resolved.

Prior to 1983, DHL had simply not tried to develop much business in the United States, leaving the field to Federal Express and United Parcel Service. Therefore, by that year, although DHL counted 97 percent of the nation’s 500 largest companies among its customers, it still held only a minuscule share of the overall domestic market. At that point, the company began to focus more on bolstering its share of the American market.

In an effort to achieve this goal, DHL installed two major hubs at airports in Cincinnati and Salt Lake City, and added nine mini-hubs in major cities across the country. The company also bought three Boeing 727s and seven Learjets, as well as new sorting equipment. In 1983, DHL Worldwide started using helicopters in New York and Houston to expedite documents during rush hour. The following year, helicopter service was introduced in Los Angeles as well.

Once the hubs had been installed, DHL Airways began offering point-to-point overnight service between 126 American cities. Still, in 1983, DHL reached only two or three percent of the domestic market. The firm’s international business continued to expand, however, and DHL Airways was in large part responsible for much of that growth. In 1984 Joseph Waechter, who had joined the firm as a courier-driver, became president of DHL Airways.

In 1983 DHL had more than 5,000 employees with 400 offices in over 90 countries. As in its earliest days, banks accounted for a large portion of its business. Other common shipments consisted of computer tapes, spare parts, and shipping papers. That year, DHL estimated it carried 80 percent of the bank material traveling by courier from Europe to the United States and revenues were approximated at $600 million. In 1984, DHL provided service to more than 125 countries, and its 500 stations were handling 15 million international and domestic shipments annually.

But just as DHL was looking to cut into the business of its domestic competitors, those same companies were aiming to siphon off portions of DHL’s international business. In 1985 both Federal Express and United Parcel Service entered the international express market. In the next two years, these companies began to erode DHL’s market share, which fell from 54 percent in 1985 to 50 percent in 1987. However, an important competitive battleground existed in Japan, and while Federal Express and UPS gained footholds in that country in the 1980s, by 1988 DHL still controlled 80 percent of the Japanese overseas market.

As competition with Fed Ex and UPS became more intense, DHL increasingly began to cooperate with businesses in similar areas. In 1985 the company teamed up with Western Union to deliver documents generated on Western Union’s EasyLink electronic mails. This allowed people to send documents via courier without having to hand-deliver material to the courier’s office.

In 1986 Charles A. Lynch was named chairman and chief executive of DHL Corp., replacing Roberts. He remained with the company just two years and was replaced by Patrick Foley, the former chairman of Hyatt Hotels.

As the world economy boomed in the 1980s, DHL experienced great growth. DHL Airways, for example, reported that between 1986 and 1987 alone, its volume rose 34 percent. In 1987 DHL Airways was the 318th largest private company in the United States, with 5,000 employees and estimated sales of $375 million. Revenues for the entire DHL network, in 1988, were calculated to be between $1.2 and $1.5 billion.

DHL continued to break new ground in the 1980s, especially in the Communist-bloc countries. The company first cracked the eastern bloc in 1983, when it began delivering packages to Hungary, East Germany, and several other countries. In addition, in 1987 DHL International signed an agreement with the China Foreign Transportation Corporation, establishing a joint venture. The company, known as DHL Sinotrans, was the first air express joint venture formed in the People’s Republic of China. Then, in 1988, DHL Britain signed an agreement with an Hungarian company to create DHL Budapest Ltd. That year, DHL controlled 91 percent of the packages bound for Eastern Europe from the West and 98 percent of all outbound shipments.

In 1989, DHL Worldwide was the 84th largest company in the United States. The company had 18,000 employees, carried more than 50 million shipments, and served 184 countries. However, though DHL’s international success was becoming firmly established, the company was not making the headway it had planned in the United States. As of 1989, DHL had only five percent of the domestic market. To bolster its name recognition in the United States, the company turned to innovative advertising techniques, including the use of humor. Cartoonist Gary Larson, creator of the wildly popular comic “The Far Side,” was employed to draw cartoons for use in DHL advertising, and in 1990 the company introduced a campaign that featured flying DHL vans whizzing past planes belonging to their competition.

DHL also took an unusual approach to air delivery. Although the company uses its own fleet of planes within Europe and on some major routes, DHL often uses scheduled airlines to carry its shipments. Federal Express, in contrast, has a large fleet of its own and seldom uses other airlines. Rather than purchase its own planes, DHL chose, instead, to invest its capital in technology and ground handling equipment, spending some $250 million on those areas in 1990 and 1991 alone.

In 1990, in order to infuse the company with fresh capital and take advantage of the resources of larger airlines, DHL International sold parts of its business to three companies. Japan Air Lines and Lufthansa, a German airline, each purchased 5 percent, while Nissho Iwai, a Japanese trading company, purchased 2.5 percent. Each firm also had the option of buying greater shares. In addition, the three companies between them acquired a 2.5 percent stake in DHL Corp. The sale of these closely-held interests brought $500 million in capital into the firm. In June 1992, all three companies exercised their option to increase their shareholding in DHL International. Japan Air Lines and Lufthansa each increased their stake to 25 percent, and Nissho Iwai increased its holding to 7.5 percent.

Although DHL had a 60 percent share of the international overnight delivery market in 1990, the company began to expand into new areas of business in order to keep up in an increasingly competitive industry. In 1990 DHL Worldwide entered the freight services industry and began carrying heavier cargo. In the company’s 20-year history of carrying small packages—generally under 70 pounds—this was DHL’s first major departure from its core business. In 1991, DHL Worldwide had revenues of $2.3 billion, and was the 59th largest private company in the United States. That year, its 21,000 employees handled more than 80 million shipments.

In another innovative move, DHL signed an agreement in 1992 to share transatlantic and European aircraft operations with one of its competitors, Emery Worldwide. The economic recession and an over-crowded North Atlantic airway were cited as the reasons behind these cooperative measures, which would allow greater operating efficiency and expanded service. This arrangement represented the first joint venture between integrated carriers in that region.

DHL Worldwide Express continues to dominate the international overnight delivery market, claiming a truly global reach in its ability to link more than 80,000 cities in 207 countries with one- or two-day service. DHL looks toward the 21st century, hoping to further extend its business into such areas as the Soviet Union and Eastern Europe, while aiming to increase the quality of its service.