UPS in Air Deal Talks With DHL

If an agreement is finalized, UPS will provide air transportation in North America for its German rival.
By TSC Staff ,

UPS

(UPS) - Get Report

is hammering out a deal with rival package delivery company DHL Express U.S., a unit of Germany's Deutsche Post AG, under which UPS would provide air transportation for DHL packages in North America.

If a deal is struck, UPS would provide air transportation for all of DHL's express, deferred and international package deliveries within the U.S. as well as for DHL packages between the U.S., Canada and Mexico.

UPS, which is a competitor of DHL, would provide only the transport of packages, primarily between airports, in North America, much like it already does for the U.S. Postal Service. DHL would continue to provide its own pick-up and delivery of DHL packages to its customers.

UPS said Wednesday it expects a finalized contract later this year. The agreement, likely to be a 10-year deal, would produce up to $1 billion in additional annual revenue for UPS. "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," said David Abney, UPS' chief operating officer. "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."

UPS said its existing air network will be able to handle much of the anticipated new volume but that additional capacity will be added starting in 2009. UPS plans on taking delivery of seven new aircraft in 2008 and another five in 2009.

Share of UPS were up $2.10, or 3.1%, at $ 70.50 in recent trading Wednesday morning.

FedEx

(FDX) - Get Report

was up $1.64, or 1.8%, at $ 91.31.

This article was written by a staff member of TheStreet.com.

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