UPS Gains Foothold In Latin America

Air shipping rights obtained in a purchase of Challenge Air Cargo could give United Parcel Service dominant market share of both heavy air cargo and express package service in Latin America.

The deal, announced June 28, calls for UPS to take over Challenge’s facilities, including warehouses and ground equipment, and its customer network. But the most lucrative aspect of the agreement may be the acquisition of the Miami-based company’s rights to ship air cargo to and from countries in Central and South America.

The terms of the deal were not announced, and the transaction is not expected to be finalized until the end of the year. But it does appear to give UPS a vital connection to potentially profitable Latin American markets.

Robert Elizondo, vice president of Latin American operations at UPS, said the parcel-shipping giant will build on Challenge’s traditional heavy cargo service. He said the new shipping rights could also drastically increase the express package business UPS does with Latin America.

The purchase “is not intended to satisfy immediate goals but to improve our strategic position in Latin America,” Elizondo said.

UPS officials are confident of gaining approval required by Latin American countries and by the Department of Transportation to purchase Challenge and to use its air-cargo rights.

Challenge was formed in 1978, and took in $131 million in revenue last year. The 1,200-employee company will continue to operate for another year or more, Elizondo said.