UPS (UPS), a component of the transportation exchange traded fund (ETF), is whipping up a deal with DHL that could translate into $1 billion in annual revenue for UPS.

The contract would mainly involve transporting DHL packages between airports in North America, and not pickup or delivery to customers. Both companies will keep their own brands under the deal, which is expected to last 10 years.

UPS is scheduled to take delivery of seven near aircraft this year and another five next year, reports Samantha Bomkamp for the Associated Press. UPS is 7.3% of the iShares Dow Jones Transportation Average (IYT). Year-to-date, the fund is up 15.7%.

The airline industry is getting pinched by high fuel prices, as most of us know, and they’re now losing about $60 per round-trip passenger, report Dean Foust and Justin Bachman. The industry is on pace to lose $7.4 billion, and the entire combined market capitalization for the six major legacy carriers and Southwest Airlines has dropped to slightly more than $17 billion.

That’s what ExxonMobil (XOM) books in revenues every two weeks.

Oil prices fell on Tuesday, but $80-$90 a barrel is considered the break-even level for most airlines. Today, oil is at $129.94 a barrel, says John Wilen for the Associated Press. If things continue as they have been, experts predict that the industry might consolidate and rethink every facet of its operations.

Some of the major airlines are components of IYT, including Southwest (LUV; 1.4%), JetBlue (JBLU; 0.5%), American Airlines parent AMR (AMR; 0.8%) and Continental Airlines (CAL; 1.7%).

For full disclosure, some of Tom Lydon’s clients own shares of IYT.

Tags | Energy, Oil, Transportation