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FedEx will produce superior financial returns for
shareowners by providing high value-added supply
chain, transportation, business, and related information
services through focused operating companies
competing collectively, and managed collaboratively,
under the respected FedEx brand.
—FedEx mission statement (excerpt)
We serve the evolving distribution, logistics, and
commerce needs of our customers worldwide,
offering excellence and value in all we do. We
sustain a financially strong company, with broad
employee ownership, that provides a long-term
competitive return to our shareowners.
—UPS mission statement (excerpt)
On June 18, 2004, the United States and China reached a landmark air-transportation agreement that quintupled the number of commercial cargo flights between the two countries. The agreement also allowed for the establishment of air-cargo hubs in China and landing rights for commercial airlines at any available airport. The pact represented the most dramatic liberalization of air traffic in the history of the two nations, and FedEx Corporation and United Parcel Service, Inc. (UPS), the only U.S. all-cargo carriers then permitted to serve the vast Chinese market,1 were certain to be the primary beneficiaries of this opportunity. News of the transportation agreement did not come as a major surprise to most observers as U.S. and Chinese negotiators had been in talks since at least February. The stock prices of both companies had been rising steadily since those talks began, but FedEx’s share price had rocketed at a rate nearly five times faster than UPS’s.2 Exhibit 1 presents an illustration of recent stock-price patterns for the two firms relative to the S&P 500 Index. FedEx had the largest foreign presence in China, with 11 weekly flights—almost twice as many as UPS. The company served 220 Chinese cities, and flew directly to Beijing, Shenzhen, and Shanghai....
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