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Report: UPS moves to cancel jet order
By CBS MarketWatch
Last Update: 1:47 AM ET March 1, 2004
SAN FRANCISCO (CBS.MW) - UPS, hit by a shift in consumer preferences toward less-expensive ground-delivery services, is negotiating with Airbus to cancel more than $1.6 billion in orders for A300-600 aircraft, according to a media report.
The Atlanta-based cargo shipper (UPS: news, chart, profile) recently notified Airbus and engine supplier Pratt & Whitney that it no longer wanted at least 20 of 90 Airbus A300s it ordered in 1998 and 2001, the Wall Street Journal reported in Monday's online edition, citing unnamed people familiar with the situation. Each plane carries a list price of more than $100 million, though big customers such as UPS typically buy multiple planes at lower, undisclosed prices, the Journal said.
Because some of those airplanes have entered early stages of production, UPS was told it could cancel no more than 16, the Journal reported, adding that as of the end of January, UPS had taken delivery of 32 planes. The Journal said one unnamed source reported the UPS orders don't contain provisions for cancellation, raising the possibility that UPS must shift its orders to other types of Airbus models or face stiff penalties.
The shift during the past couple of years to ground deliveries and away from air shipments is a growing problem for UPS and rival FedEx, (FDX: news, chart, profile) which are competing fiercely for market share. Overnight air shipments often are far more lucrative, but the economic slump led some delivery customers to send shipments by ground instead. Last year, UPS's ground deliveries rose 1.5 percent to 10.3 million shipments a day, the Journal reported.
By CBS MarketWatch
Last Update: 1:47 AM ET March 1, 2004
SAN FRANCISCO (CBS.MW) - UPS, hit by a shift in consumer preferences toward less-expensive ground-delivery services, is negotiating with Airbus to cancel more than $1.6 billion in orders for A300-600 aircraft, according to a media report.
The Atlanta-based cargo shipper (UPS: news, chart, profile) recently notified Airbus and engine supplier Pratt & Whitney that it no longer wanted at least 20 of 90 Airbus A300s it ordered in 1998 and 2001, the Wall Street Journal reported in Monday's online edition, citing unnamed people familiar with the situation. Each plane carries a list price of more than $100 million, though big customers such as UPS typically buy multiple planes at lower, undisclosed prices, the Journal said.
Because some of those airplanes have entered early stages of production, UPS was told it could cancel no more than 16, the Journal reported, adding that as of the end of January, UPS had taken delivery of 32 planes. The Journal said one unnamed source reported the UPS orders don't contain provisions for cancellation, raising the possibility that UPS must shift its orders to other types of Airbus models or face stiff penalties.
The shift during the past couple of years to ground deliveries and away from air shipments is a growing problem for UPS and rival FedEx, (FDX: news, chart, profile) which are competing fiercely for market share. Overnight air shipments often are far more lucrative, but the economic slump led some delivery customers to send shipments by ground instead. Last year, UPS's ground deliveries rose 1.5 percent to 10.3 million shipments a day, the Journal reported.
