November 1, 2000
United Parcel Service
Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!
And you Wonder why the Stock...
This is my first post to this discussion board however I have been reading the posts to it for a couple of weeks now. Please forgive me if it is a little too large, but I think you might appreciate the information I have to pass along.
Many of you seem to question the price of the stock and why it hasn't climbed like FED EX. Well maybe the reason it hasn't climbed can be found in the title of an article on the front page of the UPS pilot's union newsletter,"Flight Times." The article is titled, "UPS Claims Peak Operational "EMERGENCY" Company loses contract, fears loss of Mortorola." The story goes on to relate the operational crisis that UPS is experiencing in Asia because of a clear cut lack of maintenance planning, fleet purchasing, and pilot hiring. By its own account UPS has already lost a $6.2 million dollar contract because it left volume behind in Asia for a Chicago based customer. The article also says up to 120 pallets of cargo have sat on the ramp in Anchorage for up to 12 days because of the lack of lift. Not published in the article but widely known throughout the company is that in past weeks up to half of the 747 fleet has been down due to maintenance.
The result of all this is that UPS is scrambling for contract lift. It has been able to obtain some lift from Evergreen and Express Net. This additional contract lift is in addition to the long-term contracts it was forced to sign with Evergreen and Gemini earlier this summer because so much of the 747 fleet required immediate heavy maintenance. The hiring of contract lift is not only expensive but now UPS must pay IPA crews displaced by this extra lift to not fly, which is only fair.
Maybe Mr. Kelly and friends need to put more effort into planning for the future and accepting the fact that sometimes short-term profits have to suffer a little to acquire assets that build for a healthy future. Stop trying to run and sell UPS as an internet company. It is an old fashioned trucking and delivery company, that is benefiting from e-commerce. This problem of lack of foresight is not only indicative of just the air operation but can be seen through the UPS. Because of the increase in volume and UPS' bull headed practice of only purchasing trucks of their design. You can find a large number of rented and leased vehicles from Ryder, Budget and others at many gateways these days. This shortage of ground vehicles is not because of the normal peak upswing in volume, they have been on property since early this year. What do the brownbloods think that by not buying trucks during the boom then you don't carry them on the book during a downturn. This is exactly what they are thinking. Talk to someone in the I.E. department at most UPS gateways or centers and they can tell you all the ways that they have planned for a downturn but very little of what they have done to bolster a future during a continued era of prosperity.
FED EX is not afraid to take a chance UPS doesn't know what a chance is. FED EX has always taken great pains to streamline its feeder aircraft operation. From being a launch customer for the Cessna Caravan to its efforts to find a feeder aircraft that can directly take a container from the main deck of a DC-10, 727 or whatever aircraft. UPS instead relies more heavily on the ground transportation of package from outlaying areas to gateways which requires much more handling of a package, and which eats into profits. Not to mention it exposes the package to more potential damage because it is touched and sorted more often than a FED EX package from the same area. America's overburdened highway system can expose a whole areas' packages to delay or non-shipment. It is not unusual these days to see containers of next day packages sit on the tarmac because the ground shuttle was delayed due to traffic, or act of God. In the past UPS tried to make an effort to get these any such packages to their final destination by running a network of contracted small jets. Ever since the strike of a few years past this practice stopped when some bean counter figured out that less than 4% of people(their figure not mine) ask for refunds for missed shipments. Not only that but have any of you ever tried to get a refund from UPS for a missed delivery? As they say pulling teeth is easier. It is always someone else's fault that the package didn't get there and "they'll have to look into it" before they can give you a refund, even though their own tracking system can instantly show a service commitment was missed.
Any feeder aircraft planning is solely in the hands of UPS' vendors such as Ameriflight and whatever outdated turboprop ex-commuter aircraft they add to their fleet. Has anyone in Atlanta or Louisville given any thought to maybe jointly operating a regional jet such as the BAe-146QC/RJ80 which can handle main deck containers and thus reduce package handling and possible ground delays. UPS can enter into a creative leasing package where IPA crews flew cargo at night and when converted back to a passenger configuration a regional airline and crews operated the aircraft during the day. One operation needs the aircraft when the other doesn't. Thus airframe utilization increases and UPS makes money from leasing the aircraft to the regional carrier. Only a thought.
UPS' track record on large aircraft acquisition is not any better. The 727 re-engine program took one of the best designed aircraft ever and turned it into a performance dog that has trouble keeping all three fires burning at times. The Airbus doesn't carry anywhere near the payload of the 767. Sure it was cheaper and made friends for UPS in Europe. And some will without doubt say well it works for FED Ex why not UPS. Because FED EX purchased the Airbus to take the place of aging 727's and it does carry more than that aircraft. UPS however is trying to substitute the Airbus for the venerable DC-8 an aircraft that is much larger than the 727. Is UPS really saving money when you consider all the associated costs of adding a new type of aircraft to the fleet. Such as parts, spares and simulators, not to mention crews that can't fly the two most popular aircraft you already have in the fleet and share a common type certificate.
Well enough UPS bashing for today, I guess what I am really trying to say is that if UPS still can make money given some of the poor choices that it has made. Just think of what the company could to if it was in the hands of leadership that planned for tomorrow and not yesterday.
One last note before the angry responses come flying in. No, I do not work for UPS' competition, in fact I have been an employee of UPS for more than a decade and have an excellent standing with them. Do I fly for them? NO. However I do have a strong background in Part 121 air operations and hold a current pilot licence, Flight Engineer Certificate, and ground instructors licence. I am just a member of a growing number of employees that think the old way of doing business has to go, and that the current generation needs to step aside and let us try our hands running the company; not by tradition, but by foresight.
Fool Company Research
Motley Fool Research provides the most insightful, candid, timely, and Foolish stock research available anywhere.
Read More Posts by This Author
Go To This Post
More Recommended Posts