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UPS Chooses Shenzhen for New Intra-Asia Air Hub

Wednesday May 21, 6:00 am ET

UPS Also Launches Flights to Third Japanese City

SHENZHEN, China--(BUSINESS WIRE)--UPS (NYSE: UPS - News) is moving its intra-Asia air hub from the Philippines to Shenzhen in China’s thriving Pearl River Delta to improve customer service by reducing transit times across Asia.

UPS also has added five weekly flights in and out of Nagoya to enhance customer service to Japan’s Chubu region, a major industrial manufacturing center. UPS already flies to Tokyo and Osaka. The new flights offer significant new options to Chubu industry to reach the rest of Asia and the United States.

UPS will base the new intra-Asia hub at the Shenzhen Airport in southern China, near Hong Kong. The repositioning will slash at least a day off shipment times-in-transit for Asian customers while offering a new level of service to the manufacturing region located just north of Shenzhen. The new cost-efficient hub will be operational in 2010 and represents an estimated investment of US$180 million.

“Shenzhen’s strategic location will provide significant advantages, allowing UPS to better serve the growing Asian markets along these rapidly expanding trade lanes,” said Dan Brutto, president, UPS International. “For example, we expect a full day’s improvement in transit time on almost 200 city pairs once this hub opens.

“We want to be where our customers need us most,” Brutto added. “Since we began flying directly to China in 2001, we have watched this region grow exponentially not only from a small package perspective but also in heavy air freight.”

Currently, the markets of China, Hong Kong, Japan, Korea and Taiwan account for more than half of UPS’s total intra-Asia volume. Of this, a sizeable proportion of Asia package export volume now originates in southeast China and Hong Kong.

“Given the growth in shipping along the southern rim of China, it now makes more sense to sort and dispatch this volume from a hub closer to our customers,” explained Brutto. “And in making the switch, because of the growth we’re seeing, we intend to build a new sorting hub in Shenzhen with five times the capacity of the existing hub. UPS is very grateful to the Shenzhen government and Shenzhen Airport Authority for their strong support of our expansion and we look forward to a successful partnership.”

Since taking direct control of its international express operations inside China in 2005, UPS has made significant investments in the country. In 2007, UPS signed an agreement with the Shanghai Airport Group to establish a UPS International Air Hub at Pudong International Airport in Shanghai. When it opens in November, the Shanghai hub will connect China to the UPS global air network, including U.S. and European destinations. It thus will play a substantially different role than the hub in Shenzhen, which will connect all major Asian points.

The Shenzhen hub, expected to total about 89,000 square meters in size (almost 1 million square feet), will include an express customs handling unit, sorting facilities, cargo handling and cargo build-up areas and ramp handling operations. It will be capable initially of processing up to 18,000 pieces per hour -- compared to the existing 7,500 pieces per hour in the Philippines – but can be easily expanded to a capacity of 36,000 pieces per hour. It will employ about 400 people.

UPS long has pursued a multi-hub strategy to ensure the highest levels of air service in Asia with existing facilities in the Philippines, Taiwan, Hong Kong and Singapore. The hub in the Philippines, located in Pampanga at the former Clark Air Force Base, opened in 2002 and became the site for a large sorting facility to handle packages destined for other points in Asia. The other three hubs generally handle volume moving in or out of Asia to North America and Europe.

The existing facility at Clark will continue to be a strategic location for UPS’s multi-hub network in Asia. In addition to Clark’s role as the main import and export gateway for the Philippines, UPS also is exploring placing alternative operations there. As an employer that values its employees and with a strong tradition of promoting from within the company, UPS is identifying alternative employment opportunities within the UPS network for those who will be affected by the transition.

The new flights to Japan are the result of a U.S.-Japan aviation agreement signed in September 2007, which granted UPS the authority to operate daily flights between the U.S. and Nagoya in addition to its daily services to Tokyo and Osaka. UPS will operate five weekly MD-11 flights from Anchorage through Nagoya’s Central Japan International Airport before heading to Shanghai in China.

“The start of UPS flights to Nagoya will allow UPS to gain an even stronger foothold in Japan and increase transportation options for the various industries in Chubu,” said Brutto. “With our diverse product portfolio and worldwide network, UPS is well-positioned to support Japanese businesses interested in trading in global markets.”

Most recently in Japan, UPS expanded its facility in Shinkiba in central Tokyo to provide improved services to customers seeking integrated logistics solutions. Streamlined brokerage and bonded logistics services at the Shinkiba hub increased operational efficiency and improved customer service by shortening delivery times.