UPS plans up to 10-year air deal with DHL within the US, expects $1B in added annual sales
(Associated Press WorldStream Via Acquire Media NewsEdge) NEW YORK_UPS Inc., the world's largest shipping carrier, said Wednesday it is working toward an agreement with DHL's U.S. Express unit to carry air shipments for some DHL units within the United States.
United Parcel Service predicts the deal, when completed, will add up to $1 billion (?640 million) in annual revenue. The agreement is expected to last up to 10 years and covers express, deferred and international packages, but not freight. UPS also will transport DHL air packages between the U.S., Canada and Mexico.
Atlanta-based UPS says it will begin phasing in a limited amount of DHL business this year, with ramp-up expected in the second half of 2009. UPS and DHL will retain their own brands under the deal.
UPS said the contract will mostly involve the transport of DHL packages between airports in North America _ not the pickup or delivery of DHL packages to customers. UPS said the deal is similar to its existing agreement with the U.S. Postal Service.
UPS said it will be able to handle much of the new package volume through its existing package network, but plans to add additional capacity once the deal is completed next year. The total amount of capacity isn't yet known, but UPS is slated to take delivery of seven new aircraft this year and another five in 2009. The company is also in the midst of a $1 billion expansion of its UPS Worldport air hub in Louisville, Kentucky.
UPS spokesman Ken Sternad said the deal will not change the company's share of the air express market. While UPS has the largest ground network in the U.S., FedEx Corp. has the largest U.S. air express package business.
The arrangement with UPS is part of a U.S. restructuring announced by DHL parent Deutsche Post. DHL is slashing network capacity in the U.S. by 30 percent, which includes closing and consolidating sorting facilities and streamlining pickup and delivery routes. The company did not say how many employees would be affected.
DHL's U.S. business has posted repeated losses and slipping sales as it continues to lose market share to UPS and FedEx Corp.
Shares of UPS rose $2 (?1.28), or 2.9 percent, to $70.40 (?44.97) in morning trading. FedEx shares rose 83 cents to $90.50 (?57.81).
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