UPS to add freighters as part of $10b expansion

PUBLISHED : Friday, 19 August, 2005, 12:00am
UPDATED : Friday, 19 August, 2005, 12:00am

United Parcel Service (UPS) will spend at least $10 billion to expand its fleet of Boeing freighter aircraft and increase its carrying capacity in the Asian market as well as on other international routes.

The Atlanta-based express parcel giant yesterday agreed to buy eight B747-400 freighters from Boeing. The first aircraft is scheduled for delivery in June 2007, in time for the launch of the company's new China hub at Shanghai Pudong International Airport later that year.

US-based UPS spokesman Mark Giuffre said the timing of the delivery was not a coincidence but that the new fleet would not be exclusively based in Shanghai.

'As our volumes continue to grow in Asia, especially China, this deal will allow us to upsize to larger planes and shift the MD-11s we use there to other routes,' Mr Giuffre said. 'It's almost like the perfect plane at the perfect time.'

The deal was the largest single order for the B747-400F model, which Boeing lists at US$209.5 million per unit. Discounts of up to 30 per cent are common, especially with record orders.

UPS' international package revenue rose 22.7 per cent in the second quarter to US$2 billion, fuelled by a boom in Asia, where export volumes grew 39.5 per cent.

In China, UPS said exports doubled year on year in the quarter.

The carrier's announcement last month that it would build its first China hub in Shanghai prompted speculation that UPS may abandon its hub in the Philippines in favour of a mainland base, following the lead of rival carrier Federal Express.

FedEx served notice at Subic Bay last month in favour of a new Asia-Pacific and intra-Asia hub at Guangzhou Baiyun International Airport.

But one of UPS' most senior executives said the carrier had no intention of shifting its regional operations away from Diosdado Macapagal International Airport, the former Clark airforce base, south of Manila.

'We are happy with Clark. At this time we plan to use Clark as both our intra-Asia and Asia-Pacific hub,' chief operating officer John Beystehner told the South China Morning Post at UPS' 'technology summit' in Hong Kong last week. 'Clearly, it is our intention that Shanghai will be our intra-China hub.'

UPS will take delivery of three B747 freighters in 2007 with the final units slated to be wearing its brown and gold livery by the end of 2008. It also has ordered 10 giant 155-tonne capacity A380 freighters from Airbus with delivery starting in 2009 and has options for 10 more.

'While they have similar missions, the A380s have capabilities beyond what the B747F has,' Mr Giuffre said. 'We will be using [the A380F] in places where we can get the greatest efficiencies, maximise that large payload and limited landing rights.'

Guangzhou's new airport is also likely to see the B747Fs. UPS serves South China's newest airport with 80-tonne capacity MD-11F aircraft six times a week.