This may be a real sign that we are not completely out of the current recession. UPS, the company known for precision costing models, recently has made a decision to furlough 300 pilots or 11 percent of its 2800 member force. Is UPS seeing something we don’t see? On another front UPS is in talks with the Independent Pilots Association to gain cost concessions, that if received, would remove the need for at least some of the layoffs.

The company has been involved in a very aggressive cost cutting program looking to cut over $131 Million in operating costs. UPS’ executives anticipate a very gradual recovery in the economy and a continued need for belt tightening according to UPS Airlines President, Bob Lekites.

UPS, over the past two years, has taken many steps to eliminate $1.4 Billion in costs. This includes the elimination of over 1800 management and administrative jobs to streamline their domestic US small package business. Having said this, keep your eye on UPS’ profits as we believe you will see some significant profit gains in their upcoming financial report. UPS’ nemesis, FedEx just reported Fiscal 3rd quarter profits were up 146% to a whopping $239 Million. By some estimates UPS and FedEx lost over 1 million packages a day just due to the recession. With that being the case the only way they can gain new business is to take it away from their competition. Another way they can improve their bottom line is through General Rate Increases which both carriers took in January, 2010. Based on the considerable profit earned by FedEx we can expect that UPS will improve their profits substantially as well.

The Bottom Line: Parcel shippers should be seeking parcel negotiation consultants who can assist them with reducing their overall parcel shipping costs – a task that is best left to the experts!

Tony Nuzio