PacRim countries now largest market in air freight arena

By Randall Turk

Transcript Business Editor

The world's biggest, fastest and most efficient freight and package service would amaze its founder.

In 1907, the year of Oklahoma's statehood, 17-year-old James E. Casey began the American Messenger Company with a borrowed $100. The young entrepreneur delivered messages and parcels by bicycle throughout Seattle.

Today, UPS is the world's largest package delivery company and has expanded into international air freight and cargo. There are 88,000 delivery vehicles, a fleet of 242 jet cargo planes and 407,000 global employees serving 8 million customers a day.

The chief fleet pilot for UPS Airlines, an Oklahoman, came to Norman Thursday to discuss the history and goals of UPS, formerly known as United Parcel Service. Captain Ed Faith spoke to Professor Frank Mitchell's OU aviation management class at the university's North Base.

"UPS is evolving out of being a package carrier, although express small packages are still 75 percent of our business," Faith said. Most capacity on UPS planes is still taken up by the U.S. Postal Service, he said, but "due to customer demand, we're in cargo." He defined cargo as large, one-piece palletized shipments. Freight, while larger than parcel shipments, is in smaller units than cargo, he said.

"You may remember the package that used to top the UPS logo," he said. "That, and the word 'parcel' have been taken out of the logo." UPS planes and their loads are getting larger, with non-stop service available to Europe, Asia and the Americas, he said.

In 1929, James Casey launched the world's first air express service connecting West Coast cities. The venture was brief, interrupted by the Great Depression. Not until 1953 was UPS air service reborn to link major cities on the East and West Coasts. The company began its international expansion in 1975 in Canada and Germany. In 1988, UPS Airlines was formed to speed global commerce.

"Prior to 1988, UPS hired contract companies to operate its airplanes," Faith said. As its fleet of aircraft grew in number and value, UPS began to hire its own pilots. Other developments:

In 1993, the UPS Logistics Group was established to move packages to their destinations in the most efficient way. "Time studies is the group's largest department," Faith said. Time is of the essence in the delivery business, he said. "Every driver is trained to fasten his seatbuckle and turn the ignition key at the same time. Pilots have seven minutes after the door is closed and locked to start and move the plane."

UPS is second only to the U.S. government in the size of its mapping database. "There is no address in America UPS has not mapped," Faith said.

Efficient use of time and navigation is credited for much of the company's profits. UPS has annual revenues of $42 billion. Unlike passenger airlines today, UPS has been running operating profits of more than $6 billion a year. Other developments:

in 1998, UPS Capital Corporation was formed to manage customer inventories. The company also bought two banks to manage the receivables of client companies.

In 2000, UPS purchased Challenger Air Cargo, a financially troubled Miami company. "Challenger had all the international routes and the book of business UPS wanted," Faith said. "We took no employees or planes from Challenger."

In 2001, UPS acquired Fritz Companies, a brokerage and freight forwarding firm, chiefly for its routes to Canada. Also in 2001, UPS bought Mail Boxes Etc., a package service chain now known as The UPS Store.

In 2004, UPS bought Menlo Worldwide Forwarding, a company formed from the reorganized Emory Air Freight. "UPS acquired Menlo for its large shipments," Faith said. "We bought Menlo's routes and business, and hired 700 of its employees."

Last year UPS bought Overnite, a U.S. trucking company, which became UPS Freight.

UPS Airlines, headquartered in Louisville, serves as the company's worldport air hub. The 4 million-square-foot facility with its 123 miles of conveyor belts can process 300,000 pieces per hour. "One million packages can be sorted and loaded on planes every night," Faith said. "The Worldport is totally automated, but still has over 8,000 Louisville employees."

The company's primary European air hub in Cologne, Germany, has 800,000 square feet and employs 1,800.

Faith, a native of McAlester, received his aviation degree from Oklahoma State University and served as a flight instructor there. He was an instructor and pilot for four commuter airlines and later American Airlines. "I thought American would be my last job," he said. When American and other passenger airlines began experiencing financial problems, Faith moved to UPS. He said he was invited to join the UPS management team after only a month there. One of his special assignments was establishing the company's systems operations center to serve nine hubs.

"We run non-stop flights to locations around the world," Faith said. "Cologne to Hong Kong, 12 hours, is our longest flight. We fly 20 tons of Oslo fish from Cologne to Japan for their sushi every day of the week." Fish arriving within 24 hours of when it is caught is still considered fresh, he said.

UPS began its air freight business with used air passenger jets converted to haul cargo, Faith said. The company soon was purchasing new planes outfitted at the factory for hauling because of their reliability and efficiency. Currently, UPS operates primarily Boeing 747s, 757s, 767s and Airbus A300s. Just now heaving into sight within the fleet is the mammoth Airbus A380, whose huge cargo capacity make it useful for long international flights and access to limited airport slots around the world.

The A380 is 239 feet long and 79 feet high, with a 261-foot wingspan. The plane can carry 40,000 cubic feet of cargo, or the payload of a 727, 747 and 767 combined. Its landing weight is 700,000 pounds.

The massive 380s will be vital in serving Pacific Rim countries, the largest UPS market, Faith said. "In China we're limited to 13 flights a day and we still leave freight behind," he said. Guangzhou, China provides the largest volume of business of any Pacific Rim City, he said. "China is going gangbusters. China adds infrastructure equal to the city of Philadelphia every 90 days."

The OU aviation students wanted to know what it is like to fly the Airbus A380. "It's a fly by wire product," Faith said. "It has three computers and a side stick instead of a yoke. You can fly it with three fingers and watch those three CRT screens.

"It's like walking into a Wal-Mart store to fly."

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