A decade ago, international losses were a fact of life at UPS.

The company was bleeding red ink in Europe, where it first established ground operations in the late 1980s. UPS was also losing money in Asia, where it distributed packages through partnerships with local firms.

Brant Sanderlin/Staff (ENLARGE)

Michael Eskew, CEO of UPS: The Sandy Springs-based delivery company is moving aggressively into intra-Asia and domestic China as it faces more competition at home from FedEx and DHL.

AT A GLANCE • Clickable ticker: UPS • Headquarters: Sandy Springs • CEO: Michael L. Eskew • Employees: 407,000 • Business: Delivers packages and documents worldwide, with logistics services and management for major corporations. • Online: ups.com REVENUE • 2005: $42.5 billion • 2004: $36.5 billion • 2003: $33.4 billion • 2002: $31.2 billion • 2001: $30.3 million NET INCOME • 2005: $3.8 billion • 2004: $3.3 billion • 2003: $2.8 billion • 2002: $3.1 billion • 2001: $2.3 billion NET INCOME PER SHARE • 2005: $3.47 • 2004: $2.93 • 2003: $2.55 • 2002: $2.81 • 2001: $2.10 WANT REPRINTS? Our provider can reformat articles, with accompanying photos and graphics. Get more information on custom reprints — and custom plaques.

The Sandy Springs-based delivery giant didn't fly its own planes to China then, and the largest aircraft it envisioned for its fleet was the Boeing 747. International losses topped $250 million annually in the mid-1990s, and the then-management-owned firm stubbornly stayed the course overseas on the strength of its juggernaut domestic franchise.

Things have changed.

Now, international deliveries consistently post some of the company's highest profit margins and have been among the fastest-growing areas for several years running. Operations are growing most rapidly in China, where UPS paid $100 million last year to run its own enterprise, and it's quickly ramped up more than 75 of its own brown-logo facilities there.

UPS started flying its own planes between the United States and China in 2001, and the now publicly held firm plans to take delivery of up to 20 hulking Airbus A380 "super-jumbo" jets beginning in 2009.

"UPS now flies to more points in China than any other U.S. airline," said David Abney, UPS president for international operations. "These new flights are part of our strategy to expand our service options, stay ahead of customer needs and solidify our position as leader in the world's fastest-growing market."

UPS has 21 weekly U.S.-China flights as well as five a week between Europe and China.

International shipments posted a record $1.49 billion operating profit last year, up 30 percent from 2004. International revenue jumped 17.2 percent to $8 billion last year, and the number of international export shipments jumped 13 percent to 1.5 million packages a day.

International shipments accounted for 19 percent of total UPS revenue last year and 25 percent of the company's operating profit. UPS international operations first became profitable in 1998.

Competition here, abroad

Domestically, UPS' once-untouchable ground delivery network faces increasing competition from FedEx and DHL. FedEx Ground has steadily cut into UPS and U.S. Postal Service deliveries in recent years. FedEx ground package volume has been growing faster than UPS or the Postal Service.

Just this past week, UPS announced a $1 billion expansion of its Louisville, Ky., air hub to boost sorting capacity.

UPS also faces stiff competition in Asia from FedEx. The Memphis-based company launched daily small package deliveries throughout Asia several years ahead of UPS, as well as DHL, the largest international small-package shipper.

UPS is moving aggressively into intra-Asian and domestic China deliveries. The company has followed its established practice there of pioneering a new service with a few large corporate customers. Then it moves down the food chain to small businesses and individuals who typically pay premium prices for small-package shipments.

UPS plans to increase its visibility in Asia as a local sponsor of the 2008 Olympics in Beijing. The company was a major sponsor of the 1996 Atlanta Games and the 2000 Summer Olympics in Sydney, Australia. It later dropped its Olympic backing but signed on in a more limited way when the venue moved to China.

Investors have seen some signs for concern in international small-package markets going forward. UPS' revenue dropped 4.6 percent on a per-package basis in the fourth quarter, and UPS shares fell on investor concerns but have since rebounded.

But the underlying rationale for the shift toward globalization and offshore manufacturing continues. U.S. consumers are buying more and a greater variety of goods from foreign manufacturers, and Western Europeans are doing the same as low-cost labor in Eastern Europe makes goods produced there less expensive. Trade barriers also continue to fall around the world, simplifying international commerce.

UPS is betting those trends will continue.

"As long as globalization continues to advance, it's possible to foresee a time when non-U.S. operations will exceed U.S. operations," Abney said. "We [in the U.S.] are the largest economic power now with the largest gross domestic product. But 60 percent of the world's population lives in Asia, and their middle class is growing rapidly. There are lots of opportunities for us out there – and UPS will continue to go where our customers want us to go."