American, Delta China Proposals Won't Fly with DOT.

Business Editors

WASHINGTON--(BUSINESS WIRE)--March 29, 2000

Passenger Carriers Offer No Nationwide Benefit

Proposals by American and Delta Airlines to secure the one available designation to fly directly into China won't fly with the Department of Transportation because the passenger airlines offer no nationwide benefits to U.S. consumers, businesses and workers, United Parcel Service said in testimony to be filed with the Department of Transportation next week.

"As DOT considers which airline should receive the new designation to fly into China, it should reject the applications of American and Delta Airlines, which offer nothing more than regional and limited benefits," said Thomas Weidemeyer, President of UPS Airlines. "UPS will be able to provide significant economic advantages to the entire country by creating jobs and providing a much-needed link for better air express service to China."

UPS's comments are part of its rebuttal testimony that will be filed with the DOT on April 4, along with all the other applicants'. The rebuttal phase of the case allows the carriers to respond to each other's exhibits, filed with the DOT on February 29th. The DOT will choose one new airline carrier to fly directly into China beginning in April 2001. UPS, American Airlines, Delta Air Lines and Polar Air Cargo have all applied for the designation.

In his rebuttal testimony, Weidemeyer said the proposals from the passenger airlines provide duplicative service and cannot serve the just-in-time express market that is so vital to U.S. businesses and consumers.

In addition, there is already more than enough capacity for passengers wishing to fly to China, Weidemeyer said. "There are more than enough seats for prospective U.S.-China passengers today, next year, and well into the future. U.S.-China passenger load factors are less than 40 percent... accordingly, there will be many empty U.S.-China seats (even assuming 20 percent passenger growth in the U.S.-China market) for many years to come."

In noting the limited benefits of the other applicants' proposals, Weidemeyer stated that American's proposal to fly between Chicago and Shanghai will duplicate identical service announced by United Airlines. Furthermore, Delta's proposed service from New York to China provides little or no benefits to passengers traveling outside the New York City area.

Weidemeyer also pointed out that the only air express company with direct service to China is Federal Express. This monopoly situation leaves FedEx without competition in the China market.

UPS's proposal will provide better air express service to China than is offered to U.S. businesses today, Weidemeyer said.

"Our proposal will result in improved and enhanced service to more U.S. customers - every U.S. business and residential address - than FedEx's current service," Weidemeyer said.

Weidemeyer also questioned the relevance of testimony submitted for American by Dr. Alfred Kahn, a noted and respected economist. In that testimony, Dr. Kahn himself refused to offer an opinion on whether a passenger or express carrier designation would provide more economic benefits to the U.S.

In exhibits already filed by UPS, the company said it will be able to create roughly 1,200 new domestic UPS jobs in its first year of service to manage the increase in U.S.-China trade if it receives the designation. With more than 200,000 Teamster employees already working for UPS, most of those new jobs likely will be Teamster jobs. The increased movement of goods will also account for the creation of more than 77,000 jobs throughout the U.S. economy.

UPS received the unprecedented support of more than 330 members of Congress, including 51 U.S. Senators. Notably, congressional members with aviation expertise support UPS's application, including more than two thirds of the 50 members of the House Aviation Subcommittee.

In addition to the federal support of UPS's application, 35 governors, including those of New Jersey, Arkansas, Ohio and Pennsylvania, wrote letters supporting UPS. At the local level, 83 mayors, including those of Arlington (TX), Baltimore, Buffalo, Cincinnati, Denver, Little Rock, Los Angeles, Memphis, New Orleans, Philadelphia, Pittsburgh, St. Louis, San Antonio, San Francisco and Seattle, support UPS's application. A complete listing of UPS's congressional and state support is available at the UPS China designation web site, www.chinaquest.ups.com.