UPS and Shanghai Announce First-Ever U.S. Air Hub in China

SHANGHAI--(BUSINESS WIRE)--UPS (NYSE: UPS) and the Shanghai Airport Authority today conducted a formal signing ceremony in another step toward construction of the UPS International Air Hub at Pudong International Airport in Shanghai. Presiding over the ceremony were U.S. Transportation Secretary Mary Peters and Vice Mayor of Shanghai Yang Xiong.

“Today’s announcement represents another first for UPS in China”

The UPS International Air Hub, scheduled to open next year, will be the first constructed by a U.S. carrier and will link all of China via Shanghai to UPS’s international network with direct service to the Americas, Europe and Asia. It also will connect points served in China by UPS through a dedicated service provided by Yangtze River Express, a Chinese all-cargo airline.

The ceremony today marked the signing of the operating agreement and lease contract for the hub. These agreements are a direct result of the Agreement on Sino-U.S. Civil Aviation Transportation Air Services signed by the Chinese and U.S. governments in July 2004.

The establishment of the UPS International Air Hub is a significant step in making the Shanghai Airport an international cargo hub, promoting the development of the Shanghai transportation center and upgrading the service functions of the city of Shanghai. Under the 2004 Air Services agreement, UPS will find it easier to expand its international and Chinese networks in the future while immediately gaining new flexibility in the way it schedules its flights now.

The hub project is the latest in a series of strategic initiatives to expand UPS's operations and brand presence in China. In 2005, the company took direct control of its operations, serving more than 330 cities in China representing 85 percent of the country's international trade activity. UPS also expanded its air operations in China throughout 2006 and now flies to more points in China than any other U.S. airline, freight or passenger. The company has grown its China workforce to more than 4,500 employees while also constructing a large logistics infrastructure that includes more than 60 distribution centers.

Over the past five years, UPS has invested approximately $600 million in China, including its successful transition to become the first wholly-owned foreign express carrier in China.

Located in the southern end of the West Cargo Terminal Area under construction at Pudong International Airport, the new hub will be built on land totaling almost 96,000 square meters (1 million square feet) and rapid expansion is expected. The hub sorting capacity is projected to reach 17,000 pieces per hour by 2012 and employment should exceed 1,000 by 2010. The International Air Hub will offer immediate benefits to UPS customers, including later pick-up times in the Shanghai region and expanded capacity.

When the hub opens, it will operate 24 hours a day, seven days a week and UPS will increase its capacity into Shanghai by “up-sizing” aircraft from the current MD-11s to Boeing 747-400s.

UPS currently operates 76 takeoffs and landings per week in Shanghai, with an additional 24 dedicated movements operated by Yangtze River Express. These numbers will increase as UPS’s hub becomes operational and the capacity at Pudong International Airport continues to grow.

“UPS is adding jobs and expanding operations in the United States to keep up with the new business from its operations in China,” observed Secretary Peters. “This demonstrates the very real benefits of opening air services between two great trading nations.”

“Today’s announcement represents another first for UPS in China,” said Ken Torok, president, UPS Asia-Pacific. “The signing of this contract shows our deep commitment to China and is a critical milestone in our goal to maximize our air network infrastructure in this country. As we expand our transportation and distribution network and enhance our package delivery and supply chain services in China, the UPS International Air Hub will connect China to international markets faster and more efficiently.

“This hub would not be possible,” Torok continued, “but for the visionary leadership of the Shanghai government in putting in place the infrastructure to enable Shanghai to become a global logistics hub. It also required the farsightedness of the U.S Departments of Transportation and State and China’s Civil Aviation Administration in negotiating an air services agreement that recognizes the benefits of liberalization. In addition, these additional rights can increase UPS’s efficiency as the official logistics and express services provider for the Beijing Olympic Committee.”

Wu Nianzu, Chairman and President of the Shanghai Airport Authority (SAA) said, “Today’s signing ceremony is a new chapter in the cooperation between SAA and UPS. We are looking forward to the full implementation of the contract clauses concerning the hub. To ensure the timely completion and operation of the UPS hub, we are currently constructing the third runway and the West Cargo Terminal Area of Pudong Airport. In the spirit of the fruitful and strong alliance between both sides, we wish the UPS hub a successful completion and operation.”

UPS, which celebrates its 100th anniversary in 2007, is the world’s largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS’s stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at UPS.com.

Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, governmental regulations, our competitive environment, strikes, work stoppages and slowdowns, increases in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, which discussions are incorporated herein by reference.