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ONE-ON-ONE - July 2006
by Ed G. Lane
'We Are a Team at UPS'
The inside story on UPS Airlines' $1 billion expansion in Kentucky
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John Hindman
As vice president of public affairs and communications for UPS, John Hindman manages the company’s efforts to improve government and media relations and strengthen its reputation among the public and employees. A native of Iowa, Hindman started with UPS in 1974 as a part-time car washer in Ames. After receiving his bachelor’s degree in education from Iowa State University, he became a package car driver and has since worked in all phases of the UPS’ package operations. Hindman serves on the board of directors for the Kentucky Chamber of Commerce, the Louisville Zoo Foundation and the Louisville Medical Center Development Corporation. He also served as Site Selection Subcommittee Chairman for Gov. Fletcher’s Louisville Arena Task Force. |
Ed Lane: How long have you worked for UPS?
John Hindman: I’ve been an employee since 1974. I started in Ames, Iowa. I was a college student like many of UPS Airline’s employees in Louisville that need to finance their education. My wife and I went to work for UPS washing vehicles at night and going to school during the daytime. That financed our education. I stayed on with UPS and here I am some 30 years later.
EL: At what time in your UPS career did you get involved with site acquisition and the management of negotiations with economic development agencies?
JH: I’d been in Louisville for 11 years working in public affairs. In that capacity, my job is to interact with state and local government on behalf of the airline. The relationships that develop in that process lend themselves to supporting initiatives the company has with land acquisitions and facility development. Government plays a part in where UPS locates its facilities.
We are a team at UPS. So no success can be attributed to an individual. I owe my success to having good strong people who supported me. I just happened to be the person who was chosen to be the interface with government. I am the UPS spokesperson and behind me are very talented people that help me say the right thing at the right time.
A key player all the way through the process was UPS Vice President of Airline and International Operations Bob Lekites. He is the ranking UPS manager in Louisville, and directs our airline operations all over the globe. He dispatched me to contact the government and during every step of these negotiations I was reviewing with him our progress. He is the one that ultimately said “We’ll close the deal”.
EL: How many local negotiations have evolved since UPS Airlines’ initial move to Louisville?
JH: Three. The first was the major expansion of the hub. The second was the heavy freight facility that UPS moved to Louisville from Dayton, Ohio. The third was the most recent $1 billion expansion of the hub that UPS Airlines just announced.
EL: In the process of putting together the current UPS Airlines expansion, you were involved with a number of economic development managers and political leaders. Who was the key point person with whom most of the UPS Louisville expansion was negotiated?
JH: The point person primarily was (Secretary of the Cabinet for Economic Development) Gene Strong. Originally, I talked with President James Ramsey at the University of Louisville. We discussed UPS Airlines’ employment concerns, which was our No. 1 hurdle to overcome in the first hub expansion. We also met separately with Mayor Jerry Abramson and Gov. Ernie Fletcher.
EL: How did Greater Louisville Inc assist?
JH: GLI was right with me the entire time; they helped manage the process. GLI was there in the very beginning. I had one meeting Gene Strong prior to (GLI President) Joe Reagan joining the process. That meeting with Secretary Strong indicated there was a potential for bringing this project to Louisville.
EL: Did UPS Airlines look at other cities?
JH: UPS Airlines looked at cities in which it has operations, as well as cities in which it was not located.
EL: What cities were the best competitors to Louisville?
JH: I can’t provide that information because it is proprietary. UPS Airlines’ process of planning starts so early that we had not even finished the first hub expansion in Louisville before our long-range planning folks were already anticipating the date it would be necessary to expand and to began looking at sites. The same thing is true now. With our long-range planning, UPS doesn’t take potential sites in other cities off the table and throw them away.
EL: Can you comment on how these principals were involved in the UPS Airlines deal?
Mayor Jerry Abramson
JH: The mayor was very supportive of the potential for bringing the expansion to Louisville. From the very beginning, he actually engaged himself in identifying what hurdles UPS had to overcome. He then championed those issues within his administration to make sure the city was as supportive as it could be to winning the UPS investment for Louisville.
EL: Secretary Gene Strong
JH: Gene is excellent to work with. I worked with him in the first hub expansion as well. He is a good steward of the state’s resources. It is not a slam-dunk that you’re going to get what you want when you talk with Gene. Just as the governor and mayor, he was very interested in landing the project – but he was going to do it in a prudent way with regard to the state’s resources. Gene was easy to work with, very committed to closing the deal and getting it done quickly. Time was of the essence. UPS Airlines wanted to make a decision and move forward.
EL: Gene Strong was working with you at the state level and Joe Reagan with GLI was working with you at the local level.
JH: Actually GLI had a foot in both the city and the state’s camps. Joe Reagan helped facilitate negotiations with the state and kept in contact with the mayor’s office and the city. GLI played a key role in coordinating all the contacts with government entities.
EL: Gov. Ernie Fletcher
JH: I met with Gov. Fletcher before talking with Gene Strong and explained the potential for Kentucky being chosen for this next expansion. The governor was eager to get more information and make sure Kentucky had an opportunity to attract this expansion to the state. Obviously, the governor had the advantage of seeing what economic development had come out of the last hub expansion.
EL: What were the major benefits of the UPS Airlines expansion?
JH: The major benefits to the commonwealth, as well as the city, would be a larger employment base. UPS Airlines plans to create about1,200 full-time and 3,600 part-time positions. The jobs are good-paying and come with a competitive benefit package.
Another major benefit is attracting other companies to come to Kentucky. Being near our hub creates a competitive edge for companies by reducing times in transit and allowing later order times with next day delivery.
Our company will spend $1 billion on this project. That money will go primarily into technology and buildings.
EL: Why is Metropolitan College an important economic development benefit for UPS Airlines and its employees?
JH: The Metropolitan College Program was the answer to UPS Airline’s No. 1 concern in its first hub expansion – staffing. Louisville is a vibrant community but there are a finite number of workers available for the type of work that UPS was offering. The Metropolitan College program was hugely successful in satisfying that personnel need back in 2000. Before UPS Airlines would even discuss any incentive packages it had to satisfy future staffing concerns.
EL: What schools are involved in the Metropolitan College Program?
JH: The University of Louisville and Jefferson Community Technical College.
UPS also offers a traditional tuition reimbursement program, called “Earn and Learn.” UPS employees may go to any other school they want and earn tuition reimbursement. In the Metropolitan College Program, full tuition is paid and employees don’t have to pay up front and get reimbursed later as long as they sign a contract to work for UPS during that semester and they work there. UPS and the state share the cost of that education for those employees.
EL: Are the academic achievements of your employees involved in this program average, above average, or below average?
JH: We know they are successfully completing their schooling because that is a requirement in order to stay in the program. Beyond that, because of privacy issues, we don’t have those data.
UPS has the opportunity to select from the best of the best of these employees who want to stay on with UPS. They can grow with the organization. UPS also conducts jobs fairs to help other companies evaluate this exceptional pool of people.
Many of our employees are the first generation in their family to obtain a post-secondary education and many of them wouldn’t have the financial means for that type of an education if it were not for the program. Before the Metropolitan College Program, UPS would have a turnover rate of 70 percent. Post-Metro College, UPS has a 70-80 percent retention rate.
EL: Why has Kentucky and Louisville been such a positive growth location for UPS?
JH: Originally, UPS Airlines was looking for a central location to service the general population in the United States, so it could cut flight distances and move as many packages by ground as possible. The geographic center, if you are looking at U.S. population, is close to Louisville, Ky. That’s why you see UPS’s competitors located somewhere in the general vicinity.
Louisville was a logical location to continue to grow because UPS had a very good partnership with city and state government.
EL: How important is UPS’s relationship with the Louisville Regional Airport Authority?
JH: Our relationship is excellent. UPS Airlines operations are about 75 percent of the activity of the Louisville Airport and drives the economic health of the airport with our landed weight.
EL: Has UPS Airlines growth exceeded your expectations?
JH: I don’t think the growth of the airline is exceeding expectations. UPS Airlines and its management know where we are going and we are anticipating that our next move needs to be in the global market place.
From an overall perspective, UPS Airlines started with seven planes and 115 employees. Today UPS Airlines has over 21,000 employees in Kentucky with another 5,000 coming. UPS is the ninth-largest airline in the world with 268 jet aircraft.
EL: In 2004, UPS Airlines added 12 new flights to China, increasing its weekly service to 18 per week. The company has announced the purchase of super jumbo cargo planes like the A380. What impact do wide body planes have on operations?
JH: To maximize landing slots, UPS can fly one super-jumbo aircraft that holds 330,000 pounds of payload. That replaces two smaller planes that are each carrying about 180,000 pounds. So UPS can fly one plane using one landing slot where it used to have to use two. Aviation rights are an important part of our operations.
The range of new aircraft allows UPS to potentially fly non-stop to Asia or other parts of the world. Most of our Far East flights go through Anchorage, which still remains an important part of our network because this hub marries volume from the West and East coasts and other areas and we can put payload in a big plane and fly one slot.
Larger equipment will slow the growth in the number of flights in Louisville while still providing UPS with the ability to substantially grow landed weight and the jobs that accompany increased volumes.
EL: The cost of jet fuel has increased. What is UPS doing to reduce petroleum costs?
JH: UPS Airlines projects usage and does fuel hedging to offset some of the cost.
The hub is one place were we save on fuel. Most of the ground support equipment is eliminated by docking the aircraft directly at the building. All of those pieces of equipment that would have to drive up to the vehicle to get the containers and bring them back to the building are not required. When you park the aircraft right on the building you connect it to the power source in the building instead of a separate power generator that runs on fuel. That also reduces emissions and environmental impact.
UPS Airlines is testing technology and flight systems that determine the most efficient routes to locations in order to reduce fuel burn. The airline is testing and has been implementing a continuous descent approach procedure here in Louisville and in other airports. Flying at high levels, step-downs, and level-offs use more fuel. We simply glide in – it reduces sound, it reduces fuel burn, and is much more efficient. With the hub’s efficiency, UPS can fly one plane with two stops along the way. That saves two other planes worth of fuel and crews. These are factors that improve efficiency and optimization from a fuel perspective.
EL: In addition to your work on the UPS expansion you have been actively involved as a community volunteer in selecting a site for the Louisville Arena.
JH: If you look at the make-up of that committee – the members who were appointed by Gov. Fletcher to the task force – you will see a number strong-willed individuals who are used to being in charge in their capacity as a top business manager, government employee or elected official. Several members brought very specific ideas about where they thought the arena should be built; what it should look like.
Because of the factions in the committee, very early on we agreed to have public meetings and allow anyone to come in and suggest possible sites. The only restrictions related to the minimum size of the site and certain infrastructure that needed to be in place in order to facilitate the site’s development. As we discussed the pros and cons, the task force gradually got to the point where the site that made the most sense was the waterfront property and that is the one ultimately recommended to the governor.
EL: What is the current status of the site acquisition?
JH: The next step with the arena is having the Louisville Metro Council embrace the site and the development plan. I am confident that as the council does its due diligence it will arrive at the same conclusion that the committee did.
EL: What is the benefit to the state and Louisville of having the arena?
JH: The arena will be home for the University of Louisville, which will be the primary tenant. It will provide a facility that the commonwealth currently does not have. Kentucky will be able to host SEC tournaments, high-end concerts, wrestling, special events and conventions. It will attract new money from tourists, sport fans and businesses to our state. A whole industry develops around tourism and that attracts new money for the state’s economy. The arena and the major events it will host will enhance the image of Kentucky.
EL: Jim Host serves as the chair of the Louisville Arena Authority. How would you describe his management style and effectiveness?
JH: Jim is a character. I did not know Jim before this process study. I learned a lot from him as we got going. He throws himself 200 percent into whatever he is working on. I respect his due diligence and tenacity to keep the project moving.
Jim was always available to offer guidance and input. I would give Jim Host an “excellent” rating for his effectiveness.
EL: Because of your long and successful career with UPS, you may soon be eligible to take retirement. What are your future plans?
JH: I have been with UPS for 32 years and it has been exceptional and very challenging career. I do have the ability to retire from UPS at this point and plan to do so in the early part of 2007 – it is the centennial year for UPS.
EL: In retrospect, are you pleased that you decided to relocate from Iowa to Kentucky with UPS?
JH: When UPS offered me an opportunity to come to Louisville I was not sure what to expect. I found Kentucky an absolutely fantastic place to raise my two daughters. My wife and I have been very pleased with Louisville and have a lot of friends here. When I retire from UPS, we have every intention of being a part of this community going forward.
Ed G. Lane is chief executive of Lane Consultants Inc. and publisher
of The Lane Report.
edlane@lanereport.com
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