Two of the biggest names in the logistics and carrier industry have just signed a deal, which, even though not quite combining operations will enable one to use another's localized expertise to deliver better service. The two players in the deal are United Parcel Service (UPS) and DHL, owned by Deutsche Post.

UPS said that it was working towards an agreement to provide air transportation services for all of DHL express, deferred and international package volume within the US but not freight. UPS also would provide air lift for DHL packages between the US, Canada and Mexico.

Atlanta-based UPS says it will begin phasing in a limited amount of DHL business this year, with ramp-up expected in the second half of 2009. UPS and DHL will retain their own brands under the deal, while DHL will have a single airline partner in the US.

UPS said the contract will mostly involve the transport of DHL packages between airports in North America but not the pickup or delivery of DHL packages to customers. UPS said the deal is similar to its existing agreement with the US Postal Service.

UPS expects to have the contract wrapped up by the end of 2008. The deal will likely be for 10 years and could generate up to $1 billion in revenue, UPS said.

"We believe this arrangement with DHL would represent a wise use of our assets and network capacity while creating a substantial and profitable revenue stream for our company," said David Abney, UPS chief operating officer. "We plan to move forward quickly on the final contract."

However, he was quick to allay any doubts of a non-competitive arrangement, and asserted that there would be no dilution of brand value.

"We want to emphasise that this would be a relatively straightforward air lift agreement and that UPS and DHL will continue to compete in the marketplace under their own brands," Abney said. "UPS brings to customers its own unique value proposition. By providing these services to DHL, UPS will not be diminishing its competitive position or ability to differentiate itself with customers."

The arrangement with UPS is part of a US restructuring announced by DHL's parent Deutsche Post. DHL is slashing network capacity in the US by 30 per cent, which includes closing and consolidating sorting facilities and streamlining pickup and delivery routes. The company did not say how many employees would be affected.

In a press release, Deutsche Post said that the restructuring plan ''will lead to sustainable improvements in financial performance and provide a sound starting point for a more efficient and customer-oriented business in the future. In 2008, the company expects an underlying EBIT loss of $1.3 billion in US Express. Through the expected cost savings of around $800 million in 2010 and around $1 billion in 2011, underlying EBIT will improve accordingly. First positive effects of the plan will start showing already in 2009.''

DHL's US business has posted repeated losses and slipping sales as it continues to lose market share to UPS and FedEx Corp, the top two logistics names in the country.

United Parcel Service, Inc., commonly referred to as UPS, is the world's largest package delivery company, delivering more than 15 million packages a day to 6.1 million customers in more than 200 global locations. Since 2005, its operations include logistics and other transportation-related areas. It posted revenues of $49.7 billion last year.

DHL (originally standing for Dalsey, Hillblom and Lynn) is a Deutsche Post World Net company of Germany that provides international Mail, Express, Logistics and Finance. The company was founded in 1969 by Adrian Dalsey, Larry Hillblom, and Robert Lynn.

Deutsche Post AG is a German postal, logistics and courier company, successor to the former German state-owned mail monopoly. It is the largest of its kind in the world and declared more than $80 billion revenues in 2006.