UPS 2012 Annual Report Download - page 41

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
29
Export volume increased in 2012 compared with 2011, as growth was achieved in several key trade lanes. Asia to U.S.
export volume increased, and was favorably impacted by new technology sector product launches from several customers.
Intra-regional export volume increased in Europe and Asia, as more regional sourcing by customers led to growth in our
Transborder products. U.S. export volume declined, particularly exports from the U.S. to Europe, as economic weakness
within the European Union negatively impacted volume. Additionally, overall export volume continued to shift towards our
less premium products, such as Transborder Standard and Worldwide Expedited, as compared with our premium express
products, such as Worldwide Express, primarily due to the impact of the weaker economic conditions on our customers
internationally.
Domestic volume decreased during 2012 compared with 2011, and was negatively impacted by economic weakness
across Europe; however, this was partially offset by domestic volume growth in the U.K. and Canada.
2011 compared to 2010
Export volume increased in 2011 compared to 2010, primarily due to growth in key markets in Europe and the Americas.
Our Transborder products experienced significant volume growth, particularly in key countries within Europe. Volume for our
premium Worldwide Express and Worldwide Expedited products increased as well, particularly in the Asia-to-Europe, Europe-
to-Americas and Europe-to-Asia export trade lanes. Additionally, intra-Asia export volume experienced solid growth during
2011 compared with 2010, and was impacted by the continued economic growth in Asia overall. Our export volume growth
slowed in the latter half of 2011, largely due to decelerating growth in exports out of China and the rest of Asia, as well as
difficult comparisons with a relatively strong latter half of 2010.
Domestic volume increases were driven by continued growth in key markets, including Germany, France and Poland.
Rates and Product Mix
2012 compared to 2011
Total average revenue per piece increased 1.5% in 2012 on a currency-adjusted basis, and was impacted by base rate
increases, as well as changes in product mix and fuel surcharge rates, which are discussed below.
Currency-adjusted export revenue per piece decreased 1.3% for the year, as the shift in product mix from our premium
express products to our standard products more than offset the increase in base rates. Additionally, currency-adjusted export
revenue per piece was adversely impacted by a shortening of average trade lanes, as we experienced greater volume growth
among our lower-yielding Transborder and Trade Direct products relative to our higher-yielding transcontinental volume.
Currency-adjusted domestic revenue per piece increased 3.8% for the year, largely due to base rate increases.
On January 2, 2012, we increased the base rates 6.9% for international shipments originating in the United States
(Worldwide Express, Worldwide Express Plus, UPS Worldwide Expedited and UPS International Standard service), while
reducing the fuel surcharge indices. Rate changes for shipments originating outside the U.S. are made throughout the year and
vary by geographic market.
2011 compared to 2010
Total average revenue per piece increased 4.6% for 2011 on a currency-adjusted basis, and was impacted by base rate
increases, as well as changes in product mix and fuel surcharge rates, which are discussed below.
Export revenue per piece increased, largely due to a combination of higher fuel surcharge rates and base rate increases,
which are discussed further below. Currency-adjusted export revenue per piece increased 3.0% for 2011 compared with 2010.
Product mix adversely impacted export revenue per piece, due to robust growth among our Transborder products. Revenue per
piece was also negatively impacted as average trade lanes shortened, due to volume declines in the higher-yielding Asia-to-U.S.
export lane, and higher volume growth among the relatively lower-yielding intra-Europe and intra-Asia export lanes.
Domestic revenue per piece increased 3.9% on a currency-adjusted basis for 2011, largely due to comparatively faster
growth in our premium express products.