Air Express firms see vast Asian market potential
Foreign air express companies such as UPS and FedEx say they will expand their business in China following the Sino-US aviation agreement signed recently.
The new agreement contains a key provision that allows US cargo carriers to establish hubs in China once specific criteria are met.
FedEx is looking at hub expansion opportunities in Asia, including consideration of the new Guangzhou Baiyun International Airport, says David L Cunningham, president of FedEx Asia-Pacific operation.
Last December, FedEx signed a framework agreement with the Guangzhou Airport Authority to explore opportunities for potential future hub location in the Baiyun Airport.
UPS is also considering possibilities, says its Asia-Pacific president Ken Torok.
"This is the first aviation agreement which permits open rights for carriers to set up air hubs in China. UPS will do so at the first available opportunity." He said businesses are realizing the importance of streamlining their supply chains and the efficient movement of goods into and out of China would be a critical area for them.
The aviation agreement, which extends through 2010, provides for 111 new weekly US-China flights for US cargo airlines. The US Department of Transportation will be responsible for allocating the new flights, the first of which will be available in August.
Cunningham said if awarded additional permissions, FedEx plans to initiate new round-the-world flights connecting China to businesses and nations in Europe, North and South America and Asia.
FedEx will also explore the addition of new air services to Chinese cities along with more frequent flights to the FedEx AsiaOne network in Subic Bay, the Philippines and the FedEx EuroOne network based in Paris, he said.
Since entering the market in 1984, FedEx has expanded its guaranteed service to cover more than 220 cities across China with plans to add 100 additional cities over the next few years. FedEx has 11 flights per week through three major gateways: Beijing, Shanghai and Shenzhen.
Torok said the new US-China agreement permits UPS to connect China and Japan with direct air service, one of the largest and fastest growing trade lanes in the world.
"Our business is growing tremendously in China, and customers are asking us to do even more for them in synchronizing their businesses," Torok said. UPS, which began direct air service to China in 2001, has experienced double digit growth in the US-China market in each of the last three years and its current flights between China and the United States are operating at near capacity.
FedEx's Chinese volumes also grew by 55 per cent in the third fiscal quarter.
Both companies believed the aviation agreement will not only benefit the carriers.
FedEx said approximately USD60 billion worth of goods will leave China by air this year and another USD61 billion worth of goods will enter the country by air to support the manufacturing sector and China's vibrant and growing consumer base.
This number is expected to grow substantially thanks to these new air rights. US exports to China have grown by 75 per cent over the last three years making the United States second only to Japan as China's top trading partner, FedEx said.
According to a recent US-China Business Council study, increased access for air express providers like FedEx would allow businesses to increase investments in China by nearly 5 per cent, creating 800,000 new jobs and increasing US exports by USD8 billion to USD12 billion over the next four years.
"This landmark agreement, which recognizes the importance of open rights, especially for air express carriers, will have impact not only between the US and China, but throughout the world. It will accelerate the flow of goods into and out of China, providing substantial benefits to workers, businesses and consumers of this fast growing region," said Jorok.
