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FreightWaves Flashback: UPS picks MD-11, sets financial course

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FreightWaves Classics articles look at various aspects of the transportation industry’s history. If there are topics that you think would be of interest, please send them to [email protected].

The many industries that make up the world of freight have undergone tremendous change over the past several decades. Each week, FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.

The following is an excerpt from the December 2000 edition of American Shipper (page 79).

United Parcel Service Inc. said its airline division, UPS Airlines, has signed an agreement with Boeing Co. to take delivery of 13 MD-11 widebody freighters over the next four years.

The deal also includes options for 22 more MD-11s, which if exercised could bring the value of the agreement to more than $2 billion, UPS said.

The 13 firm orders will be delivered starting next year. The options would be delivered beginning in 2005. Boeing’s Airplane Services unit will convert the aircraft from passenger to freighter configuration. UPS will use the planes to expand its international business, particularly on long-haul flights from the United States to Europe and Asia.

The deal was announced at an investor conference last week, where UPS executives also laid out financial expectations for the coming quarter and next year.

UPS expects peak fourth-quarter business to produce growth in line with annual expectations. Slightly weaker demand is expected this year compared to last.

UPS plans to achieve revenue growth of about 10% next year, with earnings-per-share growth in the mid-teens and a return on equity of about 30%.

International export traffic should continue to grow in the double digits. International domestic growth will likely be in the upper single digits, UPS said.

UPS Logistics will continue to post 30%-plus quarterly revenue growth rates and should hit about a 5% to 6% profit margin in the 2002-2003 time frame. Service parts logistics will be a key segment. Logistics will be the most significant “growth driver” in the non-package segment, UPS said.

UPS also said it plans to expand the financial services business, including trade logistics financing, next year.

“When you look at the UPS of 2000 — a logistics company, an electronic commerce company, a consulting company and a financial services company — it’s obvious we’re not just delivering packages,” said Jim Kelly, chairman and chief executive officer.

Dive into American Shipper’s archives:

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