UPS makes informal $15 billion bid for TNT
 

UPS makes informal $15 billion bid for TNT
By Ruth Mantell, MarketWatch

Last update: 1:23 p.m. EDT Aug. 10, 2008
WASHINGTON (MarketWatch) -- UPS Inc. has informally offered 10 billion euros ($15 billion) for Dutch delivery firm TNT NV, according to a report in The Sunday Telegraph.
There have been early-stage talks in recent days, despite some reluctance from TNT, the report said.

UPS, based in Atlanta, is the world's largest package delivery company, while TNT, which serves more than 200 countries, has a strong European presence.

A deal could lead to cost saving, and further UPS's European market penetration, according to the report, which said the deal would give UPS a full air and road delivery network in Europe.

The UPS plan could include selling TNT's its postal division, it said.

In July, UPS reported a second-quarter drop of 18.3% in per-share earnings. The company cited higher fuel costs and a stagnant U.S. economy leading to declines in U.S. domestic and international package segments. Also last month, TNT reported its second-quarter results, which came in at a worse-than-expected 16% fall in net profit.

UPS has picked Morgan Stanley as its adviser, while Goldman Sachs is advising TNT, the report said.

I hope we're successful.

This isn't surprising, as UPS has been hinting at making a large capital expenditure. Looks like this might be what they had in mind.

TNT is large in Europe, I have seen their trucks everywhere. We could even surpass DHL to become #1 in the Euro-zone if this deal passes.

The only question is what UPS would do with their air network out of Liege, Belgium. A mix of B737's, Bae 146s, A-300's, and contract -400's. Over 40 aircraft. Guesses, anyone?

TNT FACTS N FIGURES

TNT Express is the only major express delivery company that does not impose consignment size or weight limits.

TNT Express handles up to 80 aircraft landing and departures per night at its European Air Express Hub in Liège, Belgium from 67 airports across Europe.

TNT Express trucks and vans drive over 1,900,000km per week in Europe.

The total length of the conveyor belts at the Liège air hub is 6.5km.

Business volumes for TNT Express in the Gulf have increased fourfold over the past three years and the company now commands a market share of 18% compared with 16% in 2001.

Founded at the end of 1995, TNT Express is the youngest express carrier in Bulgaria but has the fastest revenue growth - 30 % per year.

TNT Express in Russia has the widest coverage of the Russian territory of any delivery company, servicing over 5,500 cities and 11 time zones.

They'll order more and bigger airplanes for them so they can grow - this way they'll be able to outsource some of our flying to this UPS Europe branch.

And with the resultant loss of flying, you junior guys will be furloughed. I hope that you are being sarcastic, but after reading lots of UPS posts on this forum, I don't think you are. You really should become better informed about your company and the industry in which it operates. While it's good to be very suspicious of UPS, their sole goal is not to screw you or the IPA.

TNT owns 4 relatively new 747-400s that UPS would love to get it's hands on. The rest of their fleet is a mix of owned and chartered aircraft that would have no place in UPS' fleet.

I don't think the company's goal is to screw IPA, not at all. However they want to make money, and as much of it as possible - which is great because that's what keeps us employed.

I do try to become more informed however I believe growth from within is the best way to go. As far as TNT - well the question was asked what we think will happen with the TNT's air side? I don't think my response implies that the company wants to "screw IPA" but rather that it'd maximize the returns, that’s all.

I'd have said the same thing if Fedex bought TNT (which still might happen).

I think that those of us who actually work for UPS know all about UPS. Some may talk crap on here, but those I fly with and those I see at work fully understand the industry and UPS. Actually, nobody understands UPS, and as soon as you accept that, then you understand UPS.

And your last point I don't agree with. They do try to screw the IPA at almost every corner. If you worked here, you would see that.

I agree. We will fly what we can legally based on the international agreements.
A lot of the new volume will probably end up being moved on the ground just as the DHL U.S. would/will via an expanded ground network.

I used to think that UPS conspired against me then I figured out that they just make as much money as they can.

Well, then if you read my post again you'll realize that we're saying the same thing - I did not say they were conspiring against us but simply wanted to make as much money as they can...

They wouldn't need to be placed into UPS's fleet because they will continue to operate for TNT in Europe. These planes are operated by different companies in the EU, and are probably operated more efficiently than UPS could operate them.

I would doubt any of their flying would go to the IPA.

They wouldn't need to be placed into UPS's fleet because they will continue to operate for TNT in Europe. These planes are operated by different companies in the EU, and are probably operated more efficiently than UPS could operate them.

I would doubt any of their flying would go to the IPA.

I love how everyone assumes our scope clause is for naught...

IPA President Miller Meets with State Department In Advance of Open Skies Discussions

As the U.S. prepares to begin the next round of EU/U.S. ‘Open Skies’ agreements, IPA President Bob Miller and IPA representatives traveled to Washington, D.C. on Tuesday for a meeting with John Byerly, Deputy Assistant Secretary for Transportation Affairs.

Byerly requested the meeting with Miller to hear the IPA’s views on the Open Skies discussions and to layout the framework of agreements that had occurred between the EU and U.S. Byerly also talked about the issues that proved problematic and gave projected timelines for completing stage two of the open skies agreement.

Also attending the discussions were IPA Vice President Bob Brown, IPA Scope and International Affairs consultant Roz Ellingsworth, IPA staff attorney Olga Zhuravliova and Terri Robl, Director, Office of Aviation Negotiations.

As you may recall, Byerly (right) was the U.S. chief civil aviation negotiator for the EU-U.S. ‘Open Skies’ Air Transport Agreement that went into effect on March 30, 2008. The agreement provides substantial benefits for passengers, shippers and the air transport industry on both sides of the Atlantic.

One of the significant benefits for U.S. all cargo airlines has been the right to establish free standing hub operations in eight EU member states, including France and Germany (seventh freedoms).

One of the topics that IPA President Miller brought to Byerly’s attention was the applicability of the Railway Labor Act as it pertains to the establishment of foreign domiciles. You may recall that Pan American Airlines opened a crew base in Germany only to discover their flight attendants' labor agreement did not apply in Germany.

IPA and CAPA are currently working with Congress to develop legislation that would allow for labor union contracts to apply in foreign domiciles. Byerly said he understood the IPA’s position and found it relevant for any negotiations.

Miller called the meeting productive and beneficial to both sides and said that Byerly seemed to appreciate of the IPA’s input and opened the door for future discussions between the IPA and State Dept.

“It’s important that the IPA participate in meetings like these so that the leaders who are negotiating the Open Skies agreement know and understand our pilots’ needs as they pertain to the Open Skies. Working closely with government agencies like the State Department will help to ensure our scope clause is not violated,” said Miller.

The second rounds of EU-U.S. Open Skies negotiations is scheduled to begin September 22 in Washington and is expected to take about 18 months, with the tentative implementation date for the Second Stage agreement set for spring of 2010.

I read you post, and an bunch of other posts you put up, we are not saying the same thing.

Uh, not really, but you guys sure think everyone else's scope clause is meaningless..........

Can you be more specific?

Does anyone think the proposed TNT purchase will have any impact on the UPS/DHL deal in the US?

Not as long as DHL is just another customer.

Does TNT even have a presence in the US?

The question now is . Where will UPS open its first overseas Dom, Germany or China? Who would go? What would it pay? How long would you be committed?

MSNBC is reporting there has been no bid for TNT by UPS. UPS says it would devalue the price of our stock.

757,

I would think that the same factors that caused FDX to open over seas domiciles will be in play for UPS. Or, in other words it will have to be cheaper for UPS to operate a international domicile than not. Hopefully the FDX guys will jump in with what the triggers were that resulted in their HKG / CDG domiciles. Shooting from the hip I would think the two biggest things would be the cost of airline tickets (business class or better?) and hotel standby (room costs plus per diem) in those places.

The thing the IPA will have to be cognizant of is how the LOA is written. Our FDX bro's have walked this path and there some things to go to school on.

Just my two bits.

Biff

My big thing with the FDX LOA was that they offered a rent subsidy in US Dollars!! I think for anyone working or living in the Euro zone would have to be PAID in EUROS!! And also have the living subsidy also in EUROS! Otherwise the hit in cost of living by being paid in Dollars (even at UPS wages) and living in Euros would be too much for average employee to stomach.

If they want to keep the pay rates and per diem based on the existing contract, then I think an extra cost of living stipend (for both rent and food) of at least $5000 per month (about 3300 Euros a month) would be a bare minimum to start.

UPS Dismisses TNT Takeover Talk
A senior UPS executive on Monday dismissed talk of a $15 billion takeover bid for Dutch rival TNT as a "rumor," and said an acquisition would devalue its own shares.
Reuters had reported earlier that a source familiar with the talks said UPS was in the early stage of discussions with Europe's second-largest mail and logistics group.
"That rumor again?" Dan Brutto, president of the company's international business, told Reuters in an interview. "I look at that (TNT share price) and said, 'someone says we're going to buy something that devalues our shares too at the same time,'" he said. Brutto added, however, that acquisitions were not something he oversaw directly.
"But we always look at different things and try to fit (them) into the puzzle," Brutto told Reuters. He said UPS hoped to make some Chinese acquisitions.
"U.S. consumers are not buying, but I think the great opportunity for us internationally is business that never touches U.S. shores," said Brutto, who was in Beijing to attend the 2008 Olympics where UPS is a sponsor.
The earlier Reuters report was based on a tip from a source who could provide no further detail. TNT declined to comment. London's Sunday Telegraph reported that UPS was planning a 10 billion-euro ($15.2 billion) bid.
FedEx, another suitor, ended preliminary talks to buy TNT last month, according to traders.
The Journal of Commerce

Bigger costs probably are the loss of a day on each end of either an airline ticket or company jumpseat to position the crewmember. Losing two days out of 14/15 day line bid . Is what a 15% cost that could be eliminated, plus any travel expenses savings on flights that could be turned instead of laid over. They would also be an initial saving of new hire FO's, possibly from the respective countries making the host countries happy.

And call it? ... drum roll... :eek:

ExUPS;).............

Yes, airline tickets and hotel costs are significant, however, you're overlooking the productivity of the pilot. For example, deadheading a pilot to Asia, requires 2-3 days, then rest before the trip. The same is true for the return. Instead of the pilot working 12-15 days in a month, the pilot sometimes is only available for 4-7 days. I remember in 1992 or 1993 our DC-10 bidback during one 5 week bid month had a line which paid about 105 credit hours. It was a 15 day trip. It entailed a 4-5 day deadhead to Kuala Lumpur. The crew then flew 3 days of out and backs to Penang. The total actual block for the month was about 5 hours. A couple years later we opened Subic.

I've been in Subic for several years. I wanted to go to Hong Kong. Unfortunately, I could not justify doing so with our LOA. For me the biggest problem was the idea of "tax equalization." It's a convoluted and complex concept. In our case, it was anything but "equal." It was going to cost me tens of thousands of dollars a year. If and when the time comes for you to open foreign domiciles, hopefully the folks representing you will do their homework diligently.

Just curious. Is that tens of thousands over what you have been paying at Subic, or tens of thousands over what you would pay as a U.S. citizen living in the USA?

I haven't read every post, so forgive me if this repeats an earlier post. Even if, and its a huge if, OOPS buys TNT, there is no way in God's green earth that the IPA will do that flying. UPS has an uncanny knack of being able to shuffle cargo around to prevent our flying it. Witness the latest shuffling of city pairs to get around the latest open skies initiative. Also to be considered is the loss of jobs for the pilots. UPS has a track record of not taking the pilots when they buy a company. The EU will look on that rep with a very hairy eyeball. UPS just invested a HUGE amount of euros on the CGN hub. They don't want to **** off the EU.

TH1

I don't know, how's Federal T Xpress (FTX) and United T Service (UTS)? :D

FED-UP :D

That was kinda my point. :-) Once they shuffle the cargo to make it impossible for us to fly it, thereby avoiding our scope clause, its a small matter to integrate TNT into the CGN hub. The acquistition would be moot.

I see, tx. You have a good point there...

We don't have much of either. The 767 guys fly across ourselves and then do the intra work with no tickets and no reserves other than Star and MNG who are there anyway.

Putting a domicile in Germany just isn't that easy, talk to any of our guys that live there. Anyone ready to take the German language competency test required if you want to live there for more than a few month?

Are your friends in the military? The competency test is indeed for those that wish an extended stay, like a green card, and the ability to come and go without a hassle. Wouldn't you think that pilots based there would fit that definition? Like I said, we have a few pilots that live over there, ask them about it.

As for the language test, I see a certain irony between pilots that wouldn't want to take such a test and still be able to live and work there and the same guys who may wish to deny spanish only speakers the same privelage here :D .

As the diceman used to say, "if you don't speak the language, get the F%$! out of the country!" Works in other places s well;)

Glad I took German in college!

Ja wohl!

I'm guessing you really do see the difference. One is a person who takes a job in a foreign country for a limited amount of time, the other plans to live in our country permanently and expects us to learn and produce things in his language. "Press 1 for English".

Well, there you have it - a green card is not something that any of our pilots will ever need unless they decide to move to Germany permanently. Green card (which is actually pink :)) is a "Permanent Residency Card" - notice the word 'permanent'.

If they apply for Green Card they should be tested for knowing the German language just as we should test those who want to live here for English (or press 2 for Spanish :()

None of my friend is in the military over there, several work in the pharmaceutical business, a couple work for DHL and few others work for Lufthansa IT department.

They are all on long term visas and German is not required of them (even though some are taking classes right now for their own benefit).

Long term visa is probably what we'd get if a domicile ever opened there.