<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998
Commission File Number 1-6512
AIRBORNE FREIGHT CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
----------------------------------------
(State of incorporation or organization)
91-0837469
---------------------------------
(IRS Employer Identification No.)
3101 Western Avenue
P.O. Box 662
Seattle, Washington 98111-0662
------------------------------
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (206) 285-4600
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: XXX No:
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the close of the period covered by this report.
Common Stock, par value $1 per share
Outstanding (net of 2,497,078 treasury shares)
as of September 30, 1998 48,286,791 shares
-----------------
<PAGE>2
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Domestic $678,650 $687,549 $2,013,546 $1,861,659
International 90,432 101,049 269,866 295,245
-------- -------- ---------- ----------
769,082 788,598 2,283,412 2,156,904
OPERATING EXPENSES:
Transportation purchased 237,503 242,521 702,623 680,074
Station and ground operations 228,339 224,945 679,315 636,051
Flight operations and maintenance 121,102 110,949 355,985 315,645
General and administrative 62,811 64,842 184,701 173,942
Sales and marketing 18,288 19,742 53,256 53,821
Depreciation and amortization 45,954 41,688 136,024 126,169
-------- -------- ---------- ----------
713,997 704,687 2,111,904 1,985,702
-------- -------- ---------- ----------
EARNINGS FROM OPERATIONS 55,085 83,911 171,508 171,202
INTEREST, NET 3,005 7,026 9,881 23,522
-------- -------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 52,080 76,885 161,627 147,680
INCOME TAXES 19,267 30,266 62,627 58,400
-------- -------- ---------- ----------
NET EARNINGS 32,813 46,619 99,000 89,280
======== ======== ========== ==========
NET EARNINGS PER SHARE
Basic $ .66 $ 1.05 $ 1.98 $ 2.06
======== ======== ========== ==========
Diluted $ .65 $ .94 $ 1.94 $ 1.84
======== ======== ========== ==========
DIVIDENDS PER SHARE $ .040 $ .038 $ .118 $ .113
======== ======== ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>3
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
September 30 December 31
------------ -----------
ASSETS 1998 1997
------ ---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 14,088 $ 25,525
Trade accounts receivable, less
allowance of $9,990 and $10,290 316,589 322,549
Spare parts and fuel inventory 38,960 37,966
Deferred income tax assets 16,407 14,530
Prepaid expenses and other 26,329 25,982
---------- ----------
TOTAL CURRENT ASSETS 412,373 426,552
PROPERTY AND EQUIPMENT, NET 976,107 916,331
EQUIPMENT DEPOSITS and OTHER ASSETS 36,585 23,090
---------- ----------
TOTAL ASSETS $1,425,065 $1,365,973
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 142,366 $ 143,966
Salaries, wages and related taxes 67,099 80,154
Accrued expenses 90,974 100,126
Income taxes payable 3,130 5,440
Current portion of debt 400 381
---------- ----------
TOTAL CURRENT LIABILITIES 303,969 330,067
LONG-TERM DEBT 250,289 250,559
DEFERRED INCOME TAX LIABILITIES 81,383 65,322
OTHER LIABILITIES 57,506 49,110
SHAREHOLDERS' EQUITY:
Preferred Stock, without par value -
Authorized 5,200,000 shares,
no shares issued
Common stock, par value $1 per share -
Authorized 120,000,000 shares
Issued 50,783,869 and 50,428,548 shares 50,784 50,429
Additional paid-in capital 293,549 287,208
Retained earnings 427,186 334,083
---------- ----------
771,519 671,720
Treasury stock, 2,497,078 and 522,300
shares, at cost (39,601) (805)
---------- ----------
731,918 670,915
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,425,065 $1,365,973
========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>4
<TABLE>
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
-----------------
September 30
-----------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 99,000 $ 89,280
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 124,002 116,303
Provision for aircraft engine overhauls 12,022 9,866
Deferred income taxes 14,184 17,903
Other 8,535 2,411
-------- --------
CASH PROVIDED BY OPERATIONS 257,743 235,763
Change in:
Receivables 5,960 (57,859)
Inventories and prepaid expenses (1,341) (2,760)
Accounts payable (1,600) (1,063)
Accrued expenses, salaries and taxes payable (24,176) 49,788
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 236,586 223,869
INVESTING ACTIVITIES:
Additions to property and equipment (193,497) (135,433)
Disposition of property and equipment 951 4,425
Expenditures for engine overhauls (15,521) (8,821)
Proceeds from insurance on aircraft accident -- 18,000
Other (1,367) 214
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (209,434) (121,615)
FINANCING ACTIVITIES:
Payments on bank notes, net -- (117,300)
Principal payments on debt (251) (316)
Repurchase of common stock (38,835) --
Proceeds from common stock issuance 6,394 6,596
Dividends paid (5,897) (4,894)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (38,589) (115,914)
-------- --------
NET DECREASE IN CASH (11,437) (13,660)
CASH AT JANUARY 1 25,525 35,816
-------- --------
CASH AT SEPTEMBER 30 $ 14,088 $ 22,156
======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>5
AIRBORNE FREIGHT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE A - SUMMARY OF FINANCIAL STATEMENT PREPARATION:
The consolidated financial statements included herein are unaudited but
include all adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial position and results of operations
and cash flows for the interim periods reported.
Certain amounts for prior periods have been reclassified to conform to the
1998 presentation.
NOTE B - LONG-TERM DEBT:
<TABLE>
Long-term debt consists of the following:
<CAPTION>
September 30 December 31
------------ ------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Senior debt:
Notes payable 30,000 30,000
Senior notes 200,000 200,000
Revenue bonds 13,200 13,200
Other debt 7,489 7,740
--------- ---------
250,689 250,940
Less current portion 400 381
--------- ---------
$ 250,289 $ 250,559
========= =========
</TABLE>
NOTE C - SHARE REPURCHASE:
In August 1998, the Company's Board of Directors authorized the repurchase
of up to 2 million shares of its common stock. The repurchase of 2 million
shares was completed by the end of September for a total purchase price of
$38.8 million. The repurchased shares were not retired or canceled but
rather held as treasury stock.
NOTE D - EARNINGS PER SHARE:
Basic earnings per share are based upon the weighted average number of
common shares outstanding during the interim period. Diluted earnings per
share are based upon the weighted average number of shares outstanding
during the interim period plus dilutive common equivalent shares applicable
to the assumed exercise of outstanding stock options.
Diluted earnings per share for the three and nine months ended September
30, 1997 assumes conversion of the Company's convertible subordinated
debentures as of the beginning of the period as well as the dilutive common
equivalent shares applicable to the assumed exercise of stock options. Net
earnings as adjusted for the elimination of interest expense, net of
<PAGE>6
applicable taxes, relative to the assumed conversion was $47,459,000 for
the three month period and $92,249,000 for the nine month period.
<TABLE>
Weighted average shares outstanding used in earnings per share computations
were as follows:
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 49,921 44,325 50,056 43,246
Diluted 50,682 50,631 51,051 50,099
</TABLE>
NOTE E - NEW ACCOUNTING PRONOUNCEMENTS:
ACCOUNTING FOR DERIVATIVE INSTRUMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which will be effective for fiscal year
2000. SFAS No. 133 requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value.
The Company has entered into certain derivative contracts with financial
institutions to limit its exposure to volatility in jet fuel prices. Under
terms of the contracts, the Company either makes or receives payments if
the market price of heating oil, as determined by an index of monthly NYMEX
Heating Oil futures contracts, is lower or exceeds certain prices agreed to
between the Company and the financial institutions. The contracts, which
have no cost basis, are accounted for as hedges since there has
historically existed a high correlation between the changes in the NYMEX
index and the price of jet fuel. Settlements are made in cash and are
recorded in the earnings statement in the period of settlement as either an
increase or decrease to fuel expense.
Under the cash flow hedge provisions of SFAS No. 133, the Company will be
required to record the contracts at fair value, with corresponding changes
in fair value recorded as a component of other comprehensive income. The
Company has not adopted the provisions of SFAS No. 133 as of September 30,
1998. However, if the provisions of the statement had been adopted, a
cumulative charge of $1,000,000, net of tax, would have been recorded to
shareholders' equity and a credit to comprehensive income of approximately
$1,300,000 would have been reported for the three month period ended
September 30, 1998. A charge to comprehensive income of approximately
$400,000, would have been reported for the nine month period ended
September 30, 1998.
<PAGE>7
OTHER PRONOUNCEMENTS:
The FASB has also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which establishes standards for
reporting information about operating segments and SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits"
which revises disclosures requirements for pension and other postretirement
benefit plans. Both of these pronouncements govern only financial
statement disclosures and will be incorporated into the Company's financial
statements for the year ending December 31, 1998. Implementation of the
pronouncements are not expected to have a material impact on the Company's
financial position or results of operations.
<PAGE>8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Net earnings for the third quarter of 1998 were $32.8 million, or $.65 per
share on a diluted basis, on revenues of $769 million. Current period
results are not directly comparable with the prior year in certain
respects, as the Company benefited in the third quarter of 1997 from a
strike at United Parcel Service which added $50 - $55 million in
incremental domestic revenues and increased earnings per share results by
$.28 to $.30. Total net earnings for the third quarter of 1997 were $46.6
million or $.94 per diluted share on revenues of $789 million.
Because of weaker economic conditions, the Company experienced basically
stagnant third quarter 1998 total shipment and revenue growth on a
sequential basis over second quarter. However, the Company is pleased with
the operating performance achieved for the third quarter as signified by
the 7.2% operating margin, despite the slower growth. This strong
performance was primarily due to the improvement in the domestic yield, as
measured by revenue per shipment, which was $8.59 in the third quarter
compared to $8.49 in the second quarter of 1998.
Net earnings for the first nine months of 1998 increased 10.9% to
$99.0 million, or $1.94 per diluted share compared to $89.3 million, or
$1.84 per share for the first nine months of 1997. Total revenues for the
first nine months of 1998 were $2.283 billion, a 5.9% increase over the
comparable period of 1997. This 1998 year-to-date performance represents
approximately a 25% increase in earnings per share over 1997, on a
comparative basis when the benefit realized from the 1997 UPS strike is
eliminated, a significant improvement considering the prevailing weak
economic conditions.
<TABLE>
The following table sets forth selected shipment and revenue data for the
periods indicated:
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ % ----------- %
1998 1997 Change 1998 1997 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Shipments (in thousands):
Domestic
Overnight 46,792 45,675 2.4% 139,183 127,601 9.1%
Next Afternoon Service 14,640 14,026 4.4% 43,741 39,907 9.6%
Second Day Service 17,497 19,482 -10.2% 53,181 51,948 2.4%
100 Lbs. & Over 91 96 -5.2% 269 250 7.6%
------ ------ ------- -------
Total Domestic 79,020 79,279 -0.3% 236,374 219,706 7.6%
------ ------ ------- -------
International
Express 1,522 1,351 12.7% 4,418 3,803 16.2%
Freight 105 118 -11.0% 328 356 -7.9%
------ ------ ------- -------
Total International 1,627 1,469 10.8% 4,746 4,159 14.1%
------ ------ ------- -------
Total Shipments 80,647 80,748 -0.1% 241,120 223,865 7.7%
====== ====== ======= =======
Average Pounds per Shipment:
Domestic 4.26 4.71 -9.6% 4.28 4.45 -3.8%
International 41.06 50.32 -18.4% 42.23 51.33 -17.7%
Average Revenue per Pound:
Domestic $1.98 $1.82 8.8% $1.96 $1.89 3.7%
International $1.34 $1.34 -- $1.33 $1.36 -2.2%
Average Revenue per Shipment:
Domestic $8.59 $8.67 -0.9% $8.51 $8.46 0.6%
International $55.58 $68.79 -19.2% $56.86 $70.99 -19.9%
</TABLE>
<PAGE>9
Domestic shipments decreased .3% in the third quarter of 1998, but
increased 7.6% in the first nine months of 1998, compared to the same
periods in 1997. Domestic shipment comparisons for 1998 over 1997 are less
meaningful due to the effect of the UPS strike in the third quarter of 1997
referred to above.
The growth rate in the higher yielding domestic overnight segment increased
2.4% in the third quarter of 1998, and 9.1% in the first nine months of
1998, a higher growth rate than overall domestic shipment growth. This
helped the domestic revenue per shipment improve to $8.59 per shipment for
the third quarter of 1998, compared to the second quarter of 1998, and to
$8.51 per shipment for the first nine months of 1998. Overnight shipments
accounted for approximately 59.2% of total domestic shipments in the third
quarter of 1998 compared to 57.6% in the comparable period of 1997.
Domestic revenues for 1997 included $15.5 million of fuel surcharge revenue
which was realized in the first two quarters of 1997. This fuel surcharge
revenue added approximately $.15 per share to 1997 operating results.
International revenues decreased 10.5% and 8.6% in the third quarter and
first nine months of 1998, respectively, versus comparable periods in 1997,
primarily the result of slower global economic conditions prevailing,
especially in parts of Asia. Shipments in the heavier weight, higher
revenue per shipment freight segment continued to decline as measured both
year to year and sequentially over prior quarter. Mitigating some of the
weakness in freight volumes, the Company experienced strong growth in its
international express segment, resulting in gross margins on overall
international business remaining relatively stable. International express
shipments increased 12.7% and 16.2% in the third quarter and first nine
months of 1998, respectively, compared to the corresponding periods of
1997.
Operating expenses as a percentage of revenues were 92.5% for the first
nine months of 1998 compared to 92.1% in the first nine months of 1997 and
92.3% for all of 1997. Operating cost per shipment handled decreased 1.3%
to $8.76 for the first nine months of 1998 compared to the first nine
months of 1997. The operating cost per shipment for the third quarter of
1998 increased 1.4% to $8.85, compared to the third quarter of 1997 while
operating expense as a percentage of revenues was 92.8%. Most of the
decrease in year-to-date operating cost per shipment was attributable to
lower costs related to lower international freight volumes.
The Company experienced a 2.1% decline in productivity for the third
quarter of 1998, compared to the third quarter of 1997, as measured by
shipments handled per paid employee hour. It was difficult to achieve
productivity improvement given the overall stagnant shipment growth
experienced during the third quarter of 1998, however, the Company achieved
a 1.9% productivity improvement for the first nine months of 1998.
Continued emphasis on cost control and productivity improvement were
factors having a positive impact on 1998 operating results. Comparisons of
certain operating expense components are discussed below.
Transportation purchased decreased as a percentage of revenues to 30.8% in
the first nine months of 1998 compared to 31.5% in the comparable period of
1997. This decrease was primarily due to commercial airline costs which
were lower in total and as a percentage of total revenues in the first nine
months of 1998 due to the lower volumes of international freight shipments
discussed above. The suspension of the Federal Aviation Excise Tax reduced
costs in the first quarter of 1997 by $4.3 million. The Aviation Excise
Tax moratorium was effective through March 6, 1997, subsequent to which the
tax became effective once again; therefore, no cost reduction was realized
in 1998.
Station and ground expense increased as a percentage of revenues to 29.7%
for the first nine months of 1998 compared to 29.5% in the same period of
1997, primarily the result of lower productivity.
<PAGE>10
Flight operations and maintenance expense as a percentage of revenues
during the first nine months of 1998 was 15.6%, compared to 14.6% in the
first nine months of 1997, and was 15.7% in the third quarter of 1998
compared to 14.1% in 1997. During the second and third quarters of 1997,
costs associated with periodic aircraft maintenance were lower as a
percentage of revenues versus the comparable quarters of 1998, due to fewer
maintenance checks performed. The average aviation fuel price for the
third quarter and first nine months of 1998 was $.55 per gallon and $.58
per gallon, respectively, compared to $.70 per gallon and $.74 per gallon
for the comparable periods of 1997. Aviation fuel consumption increased to
136.0 million gallons in the first nine months of 1998, a 8.7% increase
over the comparable period of 1997. As a result of fuel hedging contracts,
the Company incurred settlement expense equivalent to approximately $.06
per gallon in the third quarter of 1998, and $.04 per gallon in the first
nine months of 1998 compared to $.01 per gallon benefit realized in the
first nine months of 1997.
General and administrative expense as a percentage of revenues in the first
nine months of 1998 was 8.1% which was comparable to the same period of
1997. This category of expense decreased as a percentage of revenues as
well as in total cost in the third quarter of 1998 versus the third quarter
of 1997, primarily the result of higher incremental accrued profit sharing
costs in 1997.
Sales and marketing expense decreased both in total cost and as a
percentage of revenues to 2.3% in the first nine months of 1998 compared to
2.5% in the first nine months of 1997. This decline is primarily due to
lower sales incentive compensation associated with slower shipment and
revenue growth.
The increase in depreciation and amortization expense in the first nine
months of 1998 is due in large part to the increased number of aircraft in
service since the third quarter of 1997.
Interest expense in the first nine months of 1998 was significantly lower
than the same period of 1997. This is primarily attributable to the
significant reduction in average outstanding borrowings during the first
nine months of 1998 compared to the corresponding period of 1997.
The Company's effective tax rate was 38.7% in the first nine months of 1998
compared to 39.5% in the first nine months of 1997 and 39.2% for all of
1997. The Company anticipates the effective tax rate for the 1998 annual
period will approximate 38.5%.
YEAR 2000 ISSUE:
The Company has implemented a compliance program to address the challenges
Year 2000 issues may present to its business. This program includes
computer systems and applications operated by the Company, computer systems
of third parties upon whose data or functionality the Company relies, and
certain other fixed assets, including aircraft, which contain date
sensitive technology critical to their operation.
Management anticipates modifications to its critical operational and
financial systems, conversions to new software, and related testing will be
substantially complete by the end of 1998. Remediation efforts and related
testing on less critical applications are scheduled to be completed by
early 1999.
As part of the compliance program, the Company has also initiated
communications with third parties (primarily customers, vendors, airport
authorities, and other governmental agencies, including the Federal
Aviation Administration) whose failure to have Year 2000 compliant systems
could have an adverse impact on the Company's operations. The Company is
scheduling testing of customer interfaces of shipment information as this
data is critical to providing services and billing.
<PAGE>11
Although the Company does not believe the Year 2000 issue will have a
material impact on its operations, there can be no guarantee that the
Company's nor any third party's Year 2000 remediation efforts will be fully
compliant. If non-compliance is extensive and involves some form of
temporary suspension of operations, this could have a material adverse
effect on the Company's business, financial condition and results of
operation.
In an attempt to mitigate the risk of noncompliance, the Company is in the
process of developing contingency plans regarding critical systems should
they fail to become Year 2000 compliant. These plans are focusing on the
Company's own critical operational and financial systems as well as
customer interfaces of shipment information. Contingency plans covering
the failure of material third party systems will also be developed as the
status readiness becomes fully known.
Management estimates the total cost of its Year 2000 compliance program to
be approximately $2.5 million, of which $1 million has cumulatively been
incurred through September 30, 1998. Total information technology costs
are not expected to differ from the normal recurring costs that are
incurred for systems development, in part due to the reallocation of
internal resources and the deferral of other projects. These costs could
differ materially if either the scope or schedule of its compliance program
is significantly altered.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operations net of changes in working capital increased for
the first nine months of 1998 to $237 million, compared to $224 million in
the first nine months of 1997. This increased liquidity is primarily the
result of the increase in profitability in 1998.
Capital expenditures continue to be a primary factor affecting the
financial condition of the Company. The Company anticipates total capital
expenditures to approximate $250 million in 1998, down from the original
estimate of $274 million. During the first nine months of 1998, total
capital expenditures net of dispositions were $193 million. Cash provided
by operations was the primary source for funding capital expenditures.
In August 1998, the Board of Directors authorized a stock repurchase
program for up to 2 million shares of the Company's common stock. The
Company accomplished the repurchase of 2 million shares by the end of
September for approximately $38.8 million. These shares were added to the
Company's treasury stock.
In November 1998, the Board of Directors authorized a second stock
repurchase program for up to 4 million shares of the Company's common
stock. All shares may be acquired, at management's discretion, over time on
the open market. Shares repurchased will not be retired or canceled, but
will be held as treasury stock.
The Company's strong operating cashflow has become the major source of
liquidity, whereas, the Company's $250 million unsecured revolving bank
credit agreement has traditionally been used as the major source of
liquidity for periods between other financing transactions. The Company
also has available $65 million under unsecured uncommitted money market
lines of credit with several banks, used in conjunction with the revolving
credit agreement to facilitate settlement and accommodate short-term
borrowing fluctuations. A total of $30.0 million was outstanding at
September 30, 1998 under the revolving bank credit and money market credit
lines, compared to $30.0 million outstanding at December 31, 1997, and
$71.2 million outstanding at September 30, 1997.
In management's opinion, the available capacity under the bank credit
agreements coupled with internally generated cash flow from remaining 1998
operations should provide adequate flexibility to finance anticipated
capital expenditures for the balance of 1998.
<PAGE>12
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. 27 - Financial Data Schedule
<PAGE>13
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized:
AIRBORNE FREIGHT CORPORATION
----------------------------
(Registrant)
<TABLE>
<CAPTION>
<S> <C> <C>
Date: 11/13/98 /s/Roy C. Liljebeck
-------- -------------------
Roy C. Liljebeck
Executive Vice President,
Chief Financial Officer
Date: 11/13/98 /s/Lanny H. Michael
-------- -------------------
Lanny H. Michael
Senior Vice President,
Treasurer and Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,088
<SECURITIES> 0
<RECEIVABLES> 326,579
<ALLOWANCES> 9,990
<INVENTORY> 38,960
<CURRENT-ASSETS> 412,373
<PP&E> 1,990,131
<DEPRECIATION> 1,014,024
<TOTAL-ASSETS> 1,425,065
<CURRENT-LIABILITIES> 303,969
<BONDS> 250,289
0
0
<COMMON> 50,784
<OTHER-SE> 681,134
<TOTAL-LIABILITY-AND-EQUITY> 1,425,065
<SALES> 0
<TOTAL-REVENUES> 2,283,412
<CGS> 0
<TOTAL-COSTS> 2,111,904
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,881
<INCOME-PRETAX> 161,627
<INCOME-TAX> 62,627
<INCOME-CONTINUING> 99,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99,000
<EPS-PRIMARY> 1.98<F1>
<EPS-DILUTED> 1.94<F2>
<FN>
<F1>EARNINGS PER SHARE - BASIC
<F2>EARNINGS PER SHARE - DILUTED
</FN>
</TABLE>
