UPS to close Dayton hub, cutting 1,400 jobs

/ Source: The Associated Press

UPS Inc., the world’s largest shipping carrier, said Thursday it plans to close its recently acquired freight sorting hub in Dayton in 2006, eliminating 1,400 jobs, in a move the company said would make its overall operations more efficient.

The facility is the company’s only sorting hub for heavy airline freight. A new hub for handling cargo weighing more than 150 pounds will be built at another UPS facility in an effort to improve efficiency, said Norman Black, spokesman for Atlanta-based UPS.

UPS has operated the hub at Dayton International Airport since Dec. 20, when the company bought it from Menlo Worldwide Forwarding for $150 million. It also assumed $110 million in debt in that deal.

UPS leases space for heavy freight on other airplanes that fly into and out of Dayton in southwest Ohio, Black said. The company does not want to shift its shipping routes to fly its planes to Dayton, and building a new sorting operation at an existing hub will allow UPS to use its own planes for heavy packages, he said.

“That’s where the efficiency comes in,” he said.

The new sorting facility will be built at one of the company’s other hubs in Louisville, Ky.; Philadelphia; Dallas; Ontario, Calif.; Rockford, Ill.; Columbia, S.C.; and Windsor Locks, Conn., Black said.

Wasting no time, Kentucky officials said Thursday they are offering up to $20 million in incentives to entice UPS to spend $82.5 million to expand its package-sorting hub at Louisville International Airport.

The Kentucky Economic Development Finance Authority said the UPS expansion would initially create 120 full-time and 600 part-time jobs, though 400 full-time jobs could be created over 10 years.

Black said UPS bought Menlo to tap into the company’s customer base and to use its delivery network.

“We didn’t go into the acquisition of Menlo knowing we were going to shut down the hub in Dayton,” he said.

Some analysts have suggested that UPS has been hampered by increasing competition from rivals including FedEx Corp. and the United States Postal Service.

Mark Davis, an analyst with FTN Midwest Research in Cleveland, said moving the Dayton sorting operation should help UPS become more competitive in the growing heavy air cargo market.

“I would think they would want a more centralized operation so they could get better use out of their airlines,” Davis said.

Workers at the Dayton site unload freight from arriving planes, sort it according to destination, and then reload it on departing planes.

A small number of workers may be offered jobs at other UPS locations, with the remaining employees given severance pay and job counseling, Black said. “This was a very difficult decision,” he said.

UPS shares rose 75 cents to close at $77.40 on the New York Stock Exchange. Its shares have ranged from $67.51 to $89.11 over the past 52 weeks.

Last month, UPS reported its fourth-quarter profit rose a disappointing 1.2 percent to $866 million on a 10.2 percent increase in revenue to $9.84 billion. At the time, the company said it was implementing a management hiring freeze and would work harder on reducing costs.

Phil Parker, president of the Dayton Area Chamber of Commerce, said the city has been trying to promote the airport as a place for good passenger service as well as heavy freight.

“This is quite a blow to us,” Parker said.