FedEx and United Parcel Service, Inc. are the two largest competitors in the world’s package delivery service industry. UPS, founded in 1907, was the largest package delivery company in the world. By 2003, UPS delivered throughout the United States and to more than 200 other countries, transporting over 13 million packages a day. FedEx, created in 1971 by Fred Smith, grew successful because of its innovative approach to purchase its own planes rather than delivering packages on the space available below commercial flights. By the end of 2003, FedEx shipped more than 5.4 million packages a day all over the world.
Both FedEx and UPS continued to expand its reach overseas. According to many, China presented enormous opportunity for both companies as their economy was predicted to become the world’s second largest within 11 years and the largest by 2039. In addition, the overall market for air transportation cargo in China had been growing consistently at around 30% every year, and was expected to continue that trend for at least the next five years. And lastly, Inter-Asia trade was projected to grow at a rate of 16.8% annually through 2005. On June 18, 2004 the United States and China reached an agreement to significantly expand air transportation between the two countries. This arrangement, the largest of its kind in history, increased the amount of cargo trading flights by approximately five times. It made over 100 new weekly flights up for grabs, and also allowed for an additional 195 weekly flights for each country; 111 by all-cargo carriers and 84 by passenger airlines. In addition, this agreement allowed for the establishment of air-cargo hubs in China and landing rights for commercial airlines at any airport. With FedEx and UPS primed to be the main beneficiaries of this new agreement, the question was which company, financially and qualitatively was better prepared to take advantage...
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