Big Brown - The Untold Story of UPS

[nitefr8dog]

Ok, I'm calling you out. What years are you referring? Aside from the one time start up costs absorbed in the early 90's, what the heck are you talking about? The airline side at UPS has pulled up the rest of the company since the books have been public since the IPO 8 years ago. The airline will also continue to become more important because you can't truck anything to China. Boats are too expensive since they tie up inventory for shippers for too long. Air cargo from Asia is making tons of money for UPS.

So how did UPS pay the bills during the start up into the early 90's my guess is the trucking generated the revenue. Again my point was working for a company that has a way to pay the bills in addition to the money generated by the airline side of the operation is a much better option than working for a pure airline. Don't be so touchy!

 

[L'il J.Seinfeld]

So how did UPS pay the bills during the start up into the early 90's my guess is the trucking generated the revenue. Again my point was working for a company that has a way to pay the bills in addition to the money generated by the airline side of the operation is a much better option than working for a pure airline. Don't be so touchy!

That's what sux about the written word--it's sometimes harder to convey intent and demeanor. I am not touchy about it at all. I just wanted to clarify that the airline side of UPS is gaining a much larger role in the whole operation.

 

[Whistlin' Dan]

"It's breath mint!"

"No, it's a candy mint!"

"Breath mint!"

"Candy mint!"

Come on! When company operates 2 or more completely separate divisions that fuse to provide one integrated service, it's almost impossible to determine which ones are profitable, and which are not. About the only generality one can draw from such arrangements are that the operating units that are the most highly taxed tend to be the ones that generate the least profit, while those that are located offshore (or in Delaware) tend to do very well.

It doesn't matter whether you cut the pizza into 6 pieces or 8. Without air, there is no UPS, and without trucks, there is no FedEx.

 

[big_al]

cargo companies are at the whims of global commerce. Anyone with an MBA who doesn't see any downside to that needs to go back and re-read their lessons again. economists look to fedex and ups to gauge how healthy the economy is... when things go bad, do you think they won't feel the pain? There will be a time when their salaries get pushed down and everyone has to fight with each other to pick up the scraps just like the pax airlines did which left well run lower cost airlines to be able to say they have better pay and work environments. Everything runs in a cycle, don't expect freight to be the future light at the end of the tunnel.

boats aren't too expensive, they just take too long in the world of fast paced low inventory cycles that most companies rely on. When gas becomes more scarce and companies have to change their style, you won't see fedex and ups growing so fast. plus, add in another company or 2 who will try to compete in the future (a well run TNT or DHL, if thats possible) for example, and things aren't going to look as bright as some blind people with MBAs want you to believe.

 

[L'il J.Seinfeld]

cargo companies are at the whims of global commerce. Anyone with an MBA who doesn't see any downside to that needs to go back and re-read their lessons again. economists look to fedex and ups to gauge how healthy the economy is... when things go bad, do you think they won't feel the pain? There will be a time when their salaries get pushed down and everyone has to fight with each other to pick up the scraps just like the pax airlines did which left well run lower cost airlines to be able to say they have better pay and work environments. Everything runs in a cycle, don't expect freight to be the future light at the end of the tunnel.

boats aren't too expensive, they just take too long in the world of fast paced low inventory cycles that most companies rely on. When gas becomes more scarce and companies have to change their style, you won't see fedex and ups growing so fast. plus, add in another company or 2 who will try to compete in the future (a well run TNT or DHL, if thats possible) for example, and things aren't going to look as bright as some blind people with MBAs want you to believe.

When times are good for United/Delta they make a few hundred million a year. When times are bad they lose BILLIONS annually.

When times are good for UPS they make 4 BILLION every year. When times are bad they make 3 BILLION every year.

There are many pilots flying cargo who realized the above before 9/11 and even more who realize it now. What you described above are the pitfalls of the ACMI worls but are not valid for UPS/FDX. There is no way the unions at UPS would ever submit to paycuts in today's world where the company is making billions. To say that UPS pilots could face paycuts is absurd.

 

[nitefr8dog]

When times are good for United/Delta they make a few hundred million a year. When times are bad they lose BILLIONS annually.

When times are good for UPS they make 4 BILLION every year. When times are bad they make 3 BILLION every year.

There are many pilots flying cargo who realized the above before 9/11 and even more who realize it now. What you described above are the pitfalls of the ACMI worls but are not valid for UPS/FDX. There is no way the unions at UPS would ever submit to paycuts in today's world where the company is making billions. To say that UPS pilots could face paycuts is absurd.

Which makes my point even more valid nice work for a company that has a way to pay the bills besides the airline side of the house, P.S. I have been flying cargo long before 9/11 and never missed pax or the pay!

 

[Whistlin' Dan]

When times are good for UPS they make 4 BILLION every year. When times are bad they make 3 BILLION every year.

...There is no way the unions at UPS would ever submit to paycuts in today's world where the company is making billions. To say that UPS pilots could face paycuts is absurd.

To suggest that a private company engaged in world commerce is somehow immune to "bad times" is equally absurd.

When the nature of that business is tied inextricably to foreign trade agreements and the price of oil, it's even more so.

The cost of fuel to fly a 1 pound package from coast-to-coast is about 4 or 5 times what it costs to truck it. The whole concept of "Overnight Express" is largely a convenience. But as fuel costs rise, it becomes to many an extravagance. Thus, the growth in "Second-day" services offered by UPS, FedEx, and DHL.

As far as "what the unions at UPS will submit to," we won't know the answer to that until they start parking airplanes. But my guess is that their pilots won't be one damn bit different than any of the tens-of-thousands of other airline pilots who've had to endure such sacrifices in recent years.

 

[AV80R]

For years the airline if you stood it alone lost money at UPS

Whittlin I think you might have gotten some incorrect information and I belive LittleJ is right.

When in training they told us that when the airline division was started, when you subtract the startup costs, the airline division made money from year 1. They are really proud of that.

As a matter of fact, I’m sure you know that in Aug 2007 UPS will celebrate 100 years as a company; we were told they will celebrate not just 100 years in business but 100 profitable years! I think its great SWA has been making money for this long and I wish them the best in the future too, but 100 years really puts things in perspective; 100 years in the black, I think it’s pretty amazing…

Btw, I am not suggesting Big Brown is "immune to bad times" - not at all, I just think they have an incredible record of making money and they should be proud of it, that's all.

 

[stupidpilot]

I think you're a bit off in your analysis WDan. Especially if you look at the cargo vs pax industry from a cyclical view. You see very sharp boom/bust portions of the chart with the pax hauling industry vs much less severe boom/bust curves with the cargo industry. The pax hauling industry sees a much more pronounced effect from the marketplace because normally it is the individual purchasing the ticket. That few $ is much more precious to him than an executive looking at the cost/profit analysis of running a company. So if fuel prices rise sharply, or if the person is at a financial disadvantage, or the economy is in a downturn, then they will opt for alternative, cheaper transportation and deal with the loss of their personal time.
On the other hand, more and more manufacturers need their cargo to reach their facilities in a timely manner in order to meet their production schedules. The reduced cost of shipping in via land or sea does not offset the revenue lost by having to wait the increased amount of time it takes to get to the plant. Pre-positioning of stocks with regular supply shipments also alleviate of having to store parts and supplies nearby where it would be economically inadviseable or cost prohibitive due to the high cost of land or rentals. So there are a myriad of reasons that the cargo industry will continue to flourish regardless of the economic picture. Especially in relation to the pax industry.

 

[Whistlin' Dan]

For years the airline if you stood it alone lost money at UPS

Whittlin I think you might have gotten some incorrect information and I belive LittleJ is right.

You got the wrong guy...I wasn't the one who said that. But even if I were, it would have absolutely no meaning for the reasons I stated above. UPS offers a bundled service to it's customers. As long as their revenue is sufficient to cover their total operating expense (and a couple-dozen other expenses we don't have time to get into here) it's somewhat irrelevant whether all their divisions are making money.

When in training they told us that when the airline division was started, when you subtract the startup costs, the airline division made money from year 1. They are really proud of that.

Again, smoke and mirrors. The real litmus test for whether "UPS Air" is making money for it's one-and-only customer "UPS ground" is whether they could survive as an entity separate from UPS Ground. I suppose it's possible that they could, but I don't see any other carriers rushing into the ACMI business with brand-new airplanes and $224/hr pilots. It would be interesting to know what UPS's direct operating costs are for an MD-11 vs. World or Gemini, and what UPS Ground pays UPS Air per ton/mile to move their cargo.

As a matter of fact, I’m sure you know that in Aug 2007 UPS will celebrate 100 years as a company; we were told they will celebrate not just 100 years in business but 100 profitable years!

That's 100 years as a Parcel Delivery Company, 18 as an airline. Who were UPS's biggest competitors during that time? "They" were the Post Office. Now you're going toe-to-toe with FedEx and DHL, with TNT, BAX, and a bunch of others picking at the low-hanging fruit. The race is just getting started.

Remember...Pan Am made money too, until other companies started flying the same places they did.

Btw, I am not suggesting Big Brown is "immune to bad times" - not at all, I just think they have an incredible record of making money and they should be proud of it, that's all.

Maybe it's just my social-conscience talking, but what I think UPS should be proud of is that for 100 years, they've provided a useful and reliable service at a reasonable price, while compensating their employees at well-above-average rates.