UPS 2013 Annual Report Download - page 24

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Broad Portfolio of Services. Our portfolio of services enables customers to choose the delivery option that is most
appropriate for their requirements. Increasingly, our customers benefit from business solutions that integrate many UPS
services in addition to package delivery. For example, our supply chain services—such as freight forwarding, customs
brokerage, order fulfillment, and returns management—help improve the efficiency of the supply chain management process.
Customer Relationships. We focus on building and maintaining long-term customer relationships. We serve 1.5 million
pick-up customers and 7.9 million delivery customers daily. Cross-selling small package, supply chain and freight services
across our customer base is an important growth mechanism for UPS.
Brand Equity. We have built a leading and trusted brand that stands for quality service, reliability and product
innovation. The distinctive appearance of our vehicles and the professional courtesy of our drivers are major contributors to our
brand equity.
Distinctive Culture. We believe that the dedication of our employees results in large part from our distinctive
“employee-owner” concept. Our employee stock ownership tradition dates from 1927, when our founders, who believed that
employee stock ownership was a vital foundation for successful business, first offered stock to employees. To facilitate
employee stock ownership, we maintain several stock-based compensation programs.
Our long-standing policy of “promotion from within” complements our tradition of employee ownership, and this policy
reduces the need for us to hire managers and executive officers from outside UPS. The majority of our management team began
their careers as full-time or part-time hourly UPS employees, and have spent their entire careers with us. Many of our executive
officers have more than 30 years of service with UPS and have accumulated a meaningful ownership stake in our company.
Therefore, our executive officers have a strong incentive to effectively manage UPS, which benefits all our shareowners.
Financial Strength. Our balance sheet reflects financial strength that few companies can match. Our financial strength
gives us the resources to achieve global scale; to invest in employee development, technology, transportation equipment and
facilities; to pursue strategic opportunities that facilitate our growth; to service our obligations; and to return value to our
shareowners in the form of dividends and share repurchases.
Government Regulation
Air Operations
The U.S. Department of Transportation (“DOT”), the Federal Aviation Administration (“FAA”), and the U.S. Department
of Homeland Security, through the Transportation Security Administration (“TSA”), have regulatory authority over United
Parcel Service Co.’s (“UPS Airlines’ ”) air transportation services. The Federal Aviation Act of 1958, as amended, is the
statutory basis for DOT and FAA authority and the Aviation and Transportation Security Act of 2001, as amended, is the basis
for TSA aviation security authority.
The DOT’s authority primarily relates to economic aspects of air transportation, such as discriminatory pricing, non-
competitive practices, interlocking relations and cooperative agreements. The DOT also regulates, subject to the authority of
the President of the United States, international routes, fares, rates and practices, and is authorized to investigate and take action
against discriminatory treatment of U.S. air carriers abroad. International operating rights for U.S. airlines are usually subject to
bilateral agreement between the U.S. and foreign governments. UPS Airlines has international route operating rights granted by
the DOT and we may apply for additional authorities when those operating rights are available and are required for the efficient
operation of our international network. The efficiency and flexibility of our international air transportation network is
dependent on DOT and foreign government regulations and operating restrictions.
The FAA’s authority primarily relates to safety aspects of air transportation, including aircraft operating procedures,
transportation of hazardous materials, record keeping standards and maintenance activities, and personnel. In 1988, the FAA
granted us an operating certificate, which remains in effect so long as we meet the safety and operational requirements of the
applicable FAA regulations. In addition, we are subject to non-U.S. government regulation of aviation rights involving non-
U.S. jurisdictions, and non-U.S. customs regulation.
FAA regulations mandate an aircraft corrosion control program, along with aircraft inspection and repair at periodic
intervals specified by approved programs and procedures, for all aircraft. Our total expenditures under these programs for 2013
were not material. The future cost of repairs pursuant to these programs may fluctuate according to aircraft condition, age and
the enactment of additional FAA regulatory requirements.