UPS Takes Wing South of the Border

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United Parcel Service, Atlanta, said last week that it plans to acquire all the assets of Challenge Air Cargo, Miami, in a move to transform UPS into the largest air cargo and express carrier in Latin America, as well as expand its air cargo business. Terms of the deal were not disclosed, but sources said the transaction could close before the Jan. 1 cut-off date.


"I don't believe any competitor will have the infrastructure, the reach, the frequency, the reliability and the range of services for customers that UPS can offer with this acquisition," said UPS chairman/CEO Jim Kelly. "It's an important strategic move that cuts years off the process of acquiring operating rights and establishing a substantial presence throughout this important and growing part of the world."


UPS already has a partnership with Challenge Air Cargo, and leases two planes to the company. Challenge has a leasing arrangement for all of its seven planes, and UPS is planning to review these arrangements and perhaps substitute them with its fleet of 225 planes and 300 charter planes.


Challenge holds aviation operating rights to every country in Latin America and operates about 120 flights a week to 16 cities in 13 Latin American countries.


The acquisition of operating and landing rights with the merger is important for UPS because of the ability of countries to limit the number of foreign air carriers allowed to operate inside their borders. Outside analysts estimated that it would take years to acquire operating rights to mirror those already held by Challenge Air.


UPS, for example, has 189 daily flights to the Americas region, but because of market and custom conditions, it is difficult to fly into countries such as Colombia and Ecuador.


"In these cases, UPS often has to use common carriage or has to deliver packages in the belly of passenger planes, where there is always the chance of getting bumped," said UPS spokeswoman Kristi Wilson. "However, Challenge was already granted the flying rights to enter into these areas, so we will be able to enter them as well."


The acquisition is one of several recent announcements from UPS affecting its international operations. On June 23, it said it would begin marketing a new Internet-based package shipping and tracking system for customers in Europe, Asia and Latin America. The service, called UPS OnLine WorldShip, provides customers the ability to ship products domestically or internationally through a secure Internet connection. The product integrates with the customer's existing database and allows customers access to all the functions of ups.com.


The rollout of UPS OnLine WorldShip is under way in 30 countries and in five languages: English, French, Spanish, German and Italian. It is the second in a suite of shipping solutions that UPS offers its international customers. Last fall, it introduced UPS Online Envoy, which is aimed at small to medium-sized shippers. UPS OnLine WorldShip is targeted to medium and large-sized shippers.


Also last month, UPS said it would streamline package delivery on a global basis with a new expedited tracking system and implementation of single-currency
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