- The Washington Times - Wednesday, November 22, 2000

The Department of Transportation yesterday tentatively awarded United Parcel Service a widely coveted slot to provide package-delivery services in and out of China beginning next spring.

UPS, aided by the political muscle of its union, the International Brotherhood of Teamsters, beat out three other carriers for the right to do business in the lucrative Chinese market.

"Our people will use this opportunity to improve services for all international businesses in and out of China and to create additional jobs in the United States," said Jim Kelly, chairman and chief executive officer of UPS.

Secretary of Transportation Rodney Slater announced the tentative decision yesterday. It will become final after a mandatory public comment period, most likely before the next administration takes office.

Mr. Slater's decision marked the end of a yearlong campaign by UPS to win the slot and become the second express cargo carrier after rival FedEx Corp. to operate in China.

"We don't get openings every day in China," said Darrell Jenkins, an analyst with George Washington University's Aviation Institute. "This is a big win for UPS."

In April 1999, Beijing agreed to allow 10 more flights into China and to permit a fourth U.S. carrier in addition to United Airlines, Northwest and FedEx to serve the Chinese market. That concession left the Transportation Department with the job of deciding which U.S. company would get the plum slot.

UPS, American Airlines, Polar Air and Delta vied for the rights, but UPS and American waged all-out campaigns to win the air rights, with corporate chiefs and employees by the dozens visiting Washington to lobby federal officials. Both sides also lined up political support, with UPS winning endorsements from more than 300 members of Congress.

Yesterday's decision will allow UPS to operate six weekly all-cargo flights to Beijing and Shanghai beginning in April from its facilities in Ontario, Calif., and Newark, N.J.

For American Airlines, Mr. Slater's decision is a bitter defeat and is likely to bring about a shift in its strategy to penetrate the Asian market. Without the right to provide direct service to China, it will rely on its existing partner there, China Eastern Airlines.

"We will be exploring opportunities for new jointly marketed services with China Eastern promptly," said Don Carty, American's chairman and chief executive officer. "As we convert these opportunities into additional China services, 2001 should become an important milestone in our strategy to build a strong Pacific network."

At the same time, observers predicted that American is likely to maintain its push for "open skies" agreements that would fully deregulate air traffic with Asia.

"American is politically savvy and as powerful as any company in this town," Mr. Jenkins said.

For the 1.5 million-member Teamsters, 200,000 of whom work for UPS, the decision was a sweet victory in the union's fight to give FedEx, a nonunion company, its first serious competition from a U.S. company in China.

"This decision will help bust the monopoly of anti-union Federal Express while giving American shippers the nationwide convenience of the UPS network," said Teamsters President James R. Hoffa.

The Teamsters' effort to win the slot for UPS raised eyebrows in Washington because the union fought tenaciously, ultimately unsuccessfully, against a bill to expand trade with China.

While eagerly seeking the chance to help deliver packages to China, the Teamsters charged that passing permanent normal trade relations with the Asian giant would result in job losses in the United States.

Teamsters officials insisted that the package-delivery opportunity would support up to 1,400 jobs, while expanded trade offered no such guarantees.

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