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Global express operator United Parcel Service (UPS) weathered the economic storm last year to post a US$4 billion profit, with China becoming its most promising market.

While group turnover grew a modest 2.9 per cent, to US$30.6 billion, the company was buoyed by a strong end to the holiday season and the continued growth of its international business.

The Louisville-based integrator's international export volume growth was particularly strong in the fourth quarter, climbing 8 per cent year on year.

Asia's overall fourth-quarter growth at 7 per cent was dwarfed by a surge in China-linked exports, which jumped 40 per cent year on year.

The carrier does not disclose tonnage or parcel volumes.

UPS chief financial officer Scott Davis said: 'During the quarter our international operation resumed its growth and profitability, and logistics and freight sections also posted gains.'

With China shining brightly, the carrier is keen to expand its access to the awakening mainland air-cargo market, particularly its commercial engine room in the Pearl River Delta.

With direct flights limited to Beijing, Shanghai and Guangzhou, it would like to achieve that goal through Hong Kong.

However, with no flights connecting the four Pearl River Delta airports with Chek Lap Kok and land border crossings constrained by antiquated customs facilities and procedures, too often just-in-time service is just a dream.

According to UPS senior vice-president of greater China Liu Kai-ming, company representatives, who are on five of the six project teams under the newly formed Logistics Development Council, will use those forums to air such concerns.

'We will encourage the Government to enhance the physical flow [of cargo] between Hong Kong and south China. The transport time can be less than one hour, but the efficiency is not there,' said Mr Liu on the sidelines of a conference hosted by the American Chamber of Commerce recently. 'It takes six to eight hours to move cargo from Shenzhen.'

Mr Liu said the focus had been on so-called fifth freedoms, which restricted Southeast Asia regional cargo flow. But the lack of airborne connections to the delta receives little attention.

Fifth-freedom rights allow a carrier flying from the United States, for example, to pick up freight in Hong Kong marked for a third destination in Asia.

'As a US carrier, we could have unlimited rights from Hong Kong to the US, but without better flow linked to the delta there will be nothing to put on those flights,' Mr Liu said.

'There are lots of flights to Europe and the US right now, but none to south China. I'm not asking for those rights, but someone has to fly there. It is an important issue that needs to be addressed.

'The purpose of logistics is to enhance the flow of global commerce. But unless information can cross borders without restriction, unless goods can cross borders without customs delays, you cannot develop the logistics industry.'

Nevertheless, the carrier remains keen to also boost its regional aviation rights through Hong Kong, particularly on to the Philippines where it is establishing its Southeast Asia hub at the former Clark Air Base outside Manila.

Analysts feel UPS will be the main beneficiary of any liberalisation stemming from the next round of air-service agreement (ASA) talks with the US, scheduled for February 27 in Hong Kong.

Its rival, Federal Express, has already negotiated five fifth-freedom rights through the SAR, whereas UPS has none.

It is thought any movement towards liberalisation will correct the imbalance.

It has also thrown its hat into the ring as one of the parties that will be tendering for the new express cargo terminal at Chek Lap Kok.

However, Mr Liu said the ASA talks would affect the business model UPS was able to propose for the new facility.

'The tendering document does not explain the entire scope of the proposal, it is not clearly defined. A lot of the details will need to be refined and negotiated before we can formulate a business plan,' he said.

'We will submit a proposal before the March 15 deadline, but, without fifth freedoms, I don't think we'll need the express centre.'



Mainland boom helps UPS post US$4b profit