November 10, 2008: 03:43 PM EST

CHICAGO -(Dow Jones)- DHL Express said United Parcel Service Inc. (UPS) remains its "preferred" partner to outsource flying parcels in the U.S. but it could fall back on existing providers if no deal emerges by year end.

DHL, a unit of Deutsche Post AG (DPW.XE), confirmed Monday that it plans to exit the U.S. domestic business after spending $10 billion trying to break the near-monopoly of UPS and FedEx Corp. (FDX).

UPS has been negotiating a deal to take on flying domestic parcels for DHL, valued at $10 billion over 10 years. Ed Wolfe at Wolfe Research estimates this could fall to around $100 million a year, given DHL's reduced U.S. presence.

DHL Express Chief Executive John Mullen said during a conference call that UPS remained the "preferred" partner, and expressed confidence that a deal could be reached by year-end.

Mullen said alternatives remained if no UPS deal were reached, likely to involve its existing air service providers, ABX Air and Astar.

DHL will continue to provide international service into the U.S. for its global package business.

"Outside the U.S., I don't see why we should lose any revenue," said Mullen. However, he conceded the company had lost some international business as a result of the uncertainty surrounding its U.S. operation.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com