As the world's largest package delivery company, fuel consumption is a necessary business expense that accounts for an average of 5.6 percent of UPS's operating revenue. From both a business and environmental perspective, UPS is committed to developing and testing innovative solutions and investing in technologies that minimize fuel consumption and reduce our impact on the environment.

Fuel conservation has been a priority at UPS since the early days of the company. In the 1930s, UPS pioneered the use of electric-powered vehicles in New York City, beginning the company's legacy of pursuing cleaner and more efficient alternative fuels. Through the years, countless resources and time have been devoted to numerous programs and technologies to help us meet our goal of increased fuel efficiency.

On the Road

UPS is committed to a sustainable future, and the company's alternative fuel vehicles play a large role in that commitment. UPS operates a fleet of more than 2,000 alternative fuel vehicles that make deliveries to homes and businesses every day. This fleet includes:

Compressed Natural Gas: UPS operates the largest private fleet of compressed natural gas vehicles in the U.S. with with almost 1,000 package delivery vehicles, including 167 scheduled to join the fleet in early 2008. UPS also operates CNG vehicles in Germany, France and Brazil.

Propane-Powered Vehicles: UPS operates more than 709 propane-powered vehicles in Canada and Mexico.

Hybrid Electric Vehicles (HEVs): UPS was the first package delivery company to introduce a hybrid electric vehicle (HEV) into daily operations. In 2007, the company added 50 HEVs to its green fleet. This technology replaces the conventional engine and transmission with a small fuel-efficient diesel engine acting as a generator to provide electrical energy for the batteries and the drive motors. Hybrid electric technology offers significant potential to dramatically decrease emissions and fuel consumption.

Liquefied Natural Gas (LNG): UPS operates 11 LNG tractor-trailers (also known as semi-trucks) on the company's California to Nevada route. As a fuel, LNG is very dense, providing a large amount of energy for the space it takes up. This makes LNG an excellent fuel for large trucks that need to go long distances before stopping for more fuel.

Electric Vehicles: Because of significant improvements in battery engineering during recent years, electric vehicle technology is now viable for vehicles that operate short distances per day and allow for periods of recharging to the system. In October 2004, UPS deployed an electric vehicle to deliver packages in Manhattan. A second electric vehicle was introduced in 2005. This technology, besides producing zero emissions, may allow us to greatly reduce maintenance cost and environmental impact. Oil changes, anti-freeze replacements, water pumps, starters and clutch changes are completely eliminated by this technology. This could have a significant impact on fleet costs in the future.

Hydraulic Hybrid Vehicles: In late 2006, the U.S. Environmental Protection Agency (EPA) began testing the world's first Full Hydraulic Hybrid UrbanDelivery Vehicle. The EPA, UPS, Eaton, International Truck and Engine, and the U.S. Army National Automotive Center have partnered to build this unique UPS truck with a full-series hydraulic hybrid drive train that has been patented by EPA.

Fuel Cell Vehicles: In a unique collaboration with DaimlerChrysler and the U.S. EPA, UPS operated fuel cell Sprinter vehicles in Ontario, Calif., and Ann Arbor, Mich. UPS's hydrogen fuel cell vehicle was the first medium-duty fuel cell vehicle in commercial operation in North America . Fuel cells work by converting energy into electricity without combustion. Water vapor and heat are the only emissions produced.

Additionally, UPS tested 13 zero emission electric minivans in downtown Los Angeles, Calif. These vehicles had a range of 80 to 90 miles and were primarily used to make Next Day Air deliveries and pickups.

Back at the Hub

Achieving maximum fuel efficiency on the road requires hours of effort behind the scenes in UPS's corporate offices, technology centers and hubs, where packages are sorted and vehicles are loaded prior to final delivery. Accordingly, UPS has developed a number of programs to help drivers and their vehicles operate at optimal levels, encouraging reduced fuel consumption. These efforts include:

• Preventive Maintenance Inspections (PMIs): UPS keeps its delivery fleet in top condition through PMIs. This system is built around the individual characteristics of the fleet, essentially giving each vehicle its own fingerprint. Through rigorous part testing, real- time duty cycle analysis and fleet-wide assessments, the Automotive Study Group developed a detailed matrix of vehicle characteristics, including engine type, vehicle group, miles driven, days of service and manufacturers' recommendations for oil changes and other types of engine service. The PMI process ensures peak performance and results in better fuel economy and lower emissions. Our PMI process has been so effective that other companies and government agencies have consulted with UPS's automotive engineers and adopted some of our maintenance procedures.
  
  
• Package Flow Technologies (PFT): Effectively and efficiently delivering more than 15 million packages and documents a day takes a lot of planning. UPS has implemented several tools and procedures, called Package Flow Technologies, to optimize delivery routes. PFT includes a suite of hardware and software designed, in part, to help drivers plan the most effective route - before a package is even loaded into a delivery vehicle.
  
  
• DIAD: Since 1991, UPS revolutionized the package delivery business when it developed and deployed the first Delivery Information Acquisition Device, known as the DIAD. The DIAD is the most comprehensive tracking device in the delivery industry, providing UPS service providers with data collection and transmission technologies that increases operational efficiencies and enables customers to track their packages in real time.
  
  This technology includes an internally-developed software that enables the driver to "see" each scheduled package delivery in the exact order needed to meet all the service requirements in the most effective way, reducing the number of miles driven and fuel consumption. The DIAD also eliminates the use of 84 million sheets of paper, saving 7,308 trees per year.
  
  Currently, UPS drivers in 49 countries, including the United States, Canada, Mexico, China, Japan and most of Western Europe, use the DIAD.

In the Hands of Our Drivers

Sometimes the biggest impact comes from the simplest step. At UPS, the importance of fuel conservation is demonstrated throughout the ranks with drivers playing an important role.

Idling: UPS drivers are trained to always turn off their package cars when they stop for a delivery, never idling at the curb or in a driveway. Even if the driver is out of the truck for a few seconds, the vehicle is always turned off.

In the Sky:

 Conserving fuel is a top priority for UPS Airlines. In fact, the company created a position dedicated to managing fuel efficiency for the airlines. Additionally, UPS Airlines has implemented programs that take advantage of the advanced avionics to keep fuel use in check.

• Lido: UPS uses a special program to calculate the most efficient routes based on weather, winds, terrain and other factors. Through various strategies, including the re-dispatch of international flights, the program has managed to save more than one million gallons of fuel.
  
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• Continuous Decent Approach (CDA): Many airlines approach the airport like taking the steps - slowly gliding from one altitude down to the next and coming to a plateau before progressing further down to the next altitude. Working to conserve fuel, limit emissions and reduce noise, UPS has tested CDA, which uses the jet's idle power to glide toward the airport. At 1,000 feet, the aircraft's power is again engaged to land the craft. UPS is currently awaiting FAA approval to implement this procedure on a broader basis.