Small package carriers have had cause to celebrate recently. In October, the U.S. and Hong Kong sealed a deal that will substantially liberalize aviation rules between the two countries. For industry titans United Parcel Service and FedEx Corporation, it's a major victory that helps to further open the entire Asian market.

"This new treaty ensures that Hong Kong will become one of the most important logistics centers in Asia," remarked Mike Eskew, UPS chairman and CEO. The company is one of the U.S. airlines interested in acquiring "beyond rights" through Hong Kong. That would allow UPS to better utilize its own aircraft to directly connect Hong Kong to international air hubs in the Philippines and Cologne, Germany.

The agreement will also bring increased revenues to small package carriers. For instance, since winning direct air rights to China in 2001, UPS China's annual revenue more than doubled as customers took advantage of new shipping options.

Ironically, it's China that has meanwhile been a source of frustration for these same carriers. The country's postal service, China Post, has attempted to regulate foreign express carriers and monopolize the market by prohibiting them from handling certain documents weighing less than 500 grams (17 ounces). This is no small move, considering the sector has been estimated to be worth as much as $1.8 billion annually.

Developments in ocean and truck delivery of small packages are also taking place, with UPS and FedEx both introducing new services in the past few months. UPS Trade Direct Ocean expedites the movement of ocean-transported packages by minimizing stops on land. The service, currently available from China and Brazil to the U.S., can save shippers from two to twenty days in transit time.

FedEx has announced a six-year expansion plan for its operating company, FedEx Ground, which will nearly double its daily package volume capacity from 2.5 million to 4.8 million by the end of fiscal year 2009. The plan includes the addition of 10 new and 23 expanded central distribution hubs, as well as the expansion or relocation of over 300 existing facilities.

"FedEx Ground operates the only fully automated hub network in the ground package industry," said Daniel J. Sullivan, president and CEO of FedEx Ground. "With the addition of these facilities--each featuring the most advanced material handling and scanning technology in the world--we will further strengthen our competitive advantage by providing customers with more information faster while enhancing the productivity and efficiency of our sorting operations."

What's the forecast going forward? According to Boeing, estimates for eastbound and westbound air cargo trade reveal a near balance in directional growth rates. Specifically, eastbound growth rates are likely to hit 7.4 percent per year over the next 20 years, with westbound growth expected to reach to 7.6 per cent per year. These figures will offset last year's numbers when the transpacific market for air cargo contracted 15.9 percent, with most of the region's countries reporting a double-digit decline in two-way traffic with North America.