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UPS Wins Major Aviation Rights to China, Boosts Economic Expectations

Strategic Insights

— 2 min read

United Parcel Service (UPS) achieved a major milestone by securing the lion's share of new aviation rights to China, outpacing top U.S. passenger carriers Delta and American airlines. The Department of Transportation awarded UPS rights to begin six weekly round-trip flights to China, starting April 1, with the company planning to operate its own Boeing 747s. This move is expected to lower shipping costs, increase package volume, and boost the U.S. economy. Industry experts predict that the intensified competition between UPS and FedEx will lead to increased air cargo trade between the United States and China.

Key Takeaways:

  • UPS secured six weekly round-trip flights to China, while United Airlines obtained two additional flights, Northwest Airlines one additional flight, and FedEx one additional flight.
  • The new flights are expected to boost the U.S. economy by increasing air cargo trade between the United States and China.
  • UPS plans to operate its own Boeing 747s on the China route, starting April 1, and will fly to China from its package sorting hubs in Ontario, California, and Newark, New Jersey, with a stop in Anchorage, Alaska.
  • The Department of Transportation backed UPS' position that the number of urgent, small package shipments between the United States and China will have a greater economic impact than additional passenger flights.
  • Industry experts predict the trans-Pacific competition between UPS and FedEx will lower shipping costs and increase package volume for goods ranging from electronics and pharmaceuticals to machine tools and textiles.
  • UPS' annual sales within China are expected to more than triple to $300 million by mid-2002, and the company plans to add up to 1,200 new U.S. jobs if it wins the China competition.
  • UPS and its labor unions, including the International Brotherhood of Teamsters, lobbied together in Washington to obtain the new routes.

Statistics:

  • U.S. air cargo trade with Asia reached $6.3 billion last year, more than half the total $11.3 billion for all international air shipments.
  • Asia is the world's fastest-growing air cargo market with annual growth rates of 7 percent.
  • China is the region's linchpin, and UPS expects its cargo flights to cut the U.S. $8.7 billion trade deficit with China by $1.3 billion in the first year of operation.
  • FedEx has a far more extensive route network in Asia than UPS, with 11 weekly flights to China, and offers next-day deliveries throughout the region.
  • FedEx revenues within Asia have been growing 20 percent or more for the past four quarters.

Sources:

  • Staff, United Parcel Service, "UPS Wins Major Aviation Rights to China, Boosts Economic Expectations"
  • Transportation Secretary Rodney Slater, cited in the article
  • Brian Clancy, aviation consultant at MergeGlobal Inc., cited in the article
  • Michael Ducker, FedEx executive vice president for international operations, cited in the article

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