Case Study Airborne Express

Industry in United States.
In 1996 businesses and individuals spent approximately $16-17 billion on expedited shipments within USA. The goal of such services was to implement overnight shipping with next-morning delivery. However, for a lower price companies offered next-afternoon delivery, second-day delivery and third-day delivery.
As the industry was developing, the companies started to offer logistics consulting information and guarantees of punctual arrival of shipments. Shipment volumes had risen 15-20% per year for the past decade. However, total revenues had risen only by 10-15% because of falling prices attributed to increased competition. The items shipped by express mail usually had high ratio of value to weight and were perishable

Airborne also was working on relationships with Roadway Package System (RPS). Their distribution systems remained different, which was prevalent considering the lack of international delivery at Airborne Express.
In order to compare find out, how Airborne survived, and recently prospered in the industry, it is useful to analyze Airborne’s costs and customers willingness to pay and compare them with the rivals’.
Let us consider the cost structure of FedEx’s overnight letter and compare it with the cost of Airborne’s overnight letter (exhibit 3).
Pick up subtotal equals to $1.37, delivery subtotal – $2.05. Total = $3.42 for pickup/delivery cost one overnight letter. Airborne saved 10% of $3.42,so the savings were approximately $15,561,000 per year advantage over Fed Ex’s cost structure. Airborne also did net spend on advertising and IT . We should also consider the fact, that Airborne saved $1.00/hour less for part-time employees,than FedEx did. The cost of Airborne’s 175 (94 owned) aircrafts was $20-24 million per aircraft, comparing with average $90 million in