UPS has announced an agreement whereby it will provide transportation in its air network for all of DHL Express U.S.'s express, deferred and international package volume within the United States. UPS also will provide air lift for DHL packages between the United States, Canada and Mexico.A final contract is anticipated later this year.
The agreement, when finalized, would be expected to extend for 10 years and produce up to $1 billion in additional annual revenue for UPS. The company says it will begin phasing in a limited amount of volume in 2008 with ramp up in 2009.
"We believe this arrangement with DHL would represent a wise use of our assets and network capacity while creating a substantial and profitable revenue stream for our company," says David Abney, UPSs chief operating officer. "We plan to move forward quickly on the final contract."
The agreement would not involve the pick-up or delivery of DHL packages to their customers, only the transport of packages, primarily between airports, in North America. As such, the work will be similar to that currently performed by UPS for the U.S. Postal Service.
UPS will be able to handle much of the anticipated new volume in its existing air network, although additional capacity will be added beginning in 2009 upon full implementation. The total amount of capacity needed will be determined at that time; however, UPS is currently scheduled to take delivery of seven new aircraft in 2008 and another five in 2009. The company is also well along on a $1 billion expansion of its UPS Worldport air hub in Louisville, Ky.
The arrangement with UPS is part of a broader U.S. restructuring announced by Deutsche Post World Net at a press conference in Bonn, Germany.
"We want to emphasize that this would be a relatively straightforward air lift agreement and that UPS and DHL will continue to compete in the marketplace under their own brands," Abney notes. "UPS brings to customers its own unique value proposition. By providing these services to DHL, UPS will not be diminishing its competitive position or ability to differentiate itself with customers."
"Our future focus will be where customers have told us they need to do business the most," adds John Mullen, Deutsche Post World Net management board member and CEO of DHL Express. "Our entire network restructure will enable us to bring a new level of reliability and increased service performance to our international and U.S. domestic customers while cutting unnecessary costs such as maintaining infrastructure that customers dont ask for."
