Air Transport World

Solid footing; UPS's international air-express expansion is made possible by its main business - ground delivery. (company profile)

United Parcel Service has a lot to be thankful for. it was smart enough to create a hugely successful domestic parcel business that is a base for, and helps fund, current projects. It set up a German operation in 1976 that places it in the geographical heart of the "new" Europe. It has new labor contracts that give it a slight amount of relief in union hiring rules and let it compete more effectively in air service. Most of all, in this period of massive investment at home and abroad, UPS is thankful to be owned by its managers and supervisors, which shields it from the Wall Street second guessing that plagues Federal Express.

On the latter issue, Ken Sternad, corporate director of public relations, says: "Our losses abroad aren't dissimilar to Federal's but they have shareholders and Wall Street to answer to. We can take our time and do it right. We know Europe and Japan are the answer to significant profits. It is extremely painful for us in the short-term but we know it's the right thing."

UPS'S well-known story, from messenger service in Seattle in 1907 to international package giant in 1991, does not need retelling. But the last time ATW visited UPS was in 1985, three years after it began competing with FedEx in the overnight business and three years before it began operating its own airline rather than contracting for air service.

$5-BILLION FLEET SPENDING

The intervening period shows what money can buy. As of midyear, UPS was operating or had on order 45 Boeing 757 package freighters; eight 727-200s; 39 727-100s; 49 DC-8s and 11 747s. Taking purchases, re-engining and AD compliance into account, UPS will have spent well over $5 billion on its present fleet. it charters an additional 259 aircraft. Its daily schedule includes 960 domestic and 415 international segments.

The company owns all of its nonchartered aircraft outright. That sounds like Delta's and Northwest's good old days. UPS dislikes leasing, except for short-term agreements to handle the Christmas rush. it also may lease to cover aircraft that have to be taken out of service to meet FAA airworthiness directives on the older aircraft. As for the rest, Richard Oehme, senior Vp-air operations, says: "The aviation industry is getting itself in trouble even with leveraged leases. …

Log in to your account to read this article – and millions more.