UPS aims to set up first US carrier hub in China
United Parcel Service Inc, which has seen double digit growth in China in the past three years, is aiming to become the first US airline to set up a hub on the mainland.
A landmark aviation deal set to be signed by the US and China tomorrow will allow US carriers to establish hubs in China provided they meet certain requirements, including 72 weekly flight movements in and out of the country.
‘China is not an option for UPS, it’s essential,’ Steven Okun, UPS Vice President of Public Affairs for the Asia Pacific Region told AFX-Asia in an interview.
‘We already have four hubs in the Asia Pacific region — Hong Kong, Singapore, the Philippines and Taipei — and we look forward to being the first US carrier to set up a hub here.’
With ‘some regulatory and operational issues’ still to be resolved, Okun said he couldn’t give a timetable nor a figure for any investment for the hub which will be based in Shanghai.
China has forced foreign express-delivery firms to form joint ventures with local partners. UPS joined forces with state-owned logistics firm Sinotrans in 1988 and business has boomed.
UPS witnessed a 45 pct growth in its outbound volume from China last year, up from 35 pct growth in 2002. The year-on-year growth rate hit 60 pct in the first quarter, and rose 70 pct in the second quarter.
But with China set to allow foreign firms to establish wholly-owned operations at the end of next year as part of its WTO entry commitments, Okun did not rule out parting company with its long-term partner.
‘We are leaving all our options open,’ he said, but would not be drawn further.
Under the US-China aviation agreement reached last month, there will be a significant expansion in flight frequencies and destinations between the two countries.
‘UPS looks to continued growth here, and the new air service agreement between the US and China will serve as one of the catalysts,’ said Okun.
Five additional airlines from each country will be allowed to serve the US-China market by 2010, up from the existing four, and the number of weekly flights by each side will rise to 249 from the current 54.
‘Today we have 24 aircraft movements in China, we hope to have 60 movements by 2005 and even more prior to 2007,’ Okun said.
UPS has applied to the US Department of Transportation for six additional weekly frequencies to Shanghai from October and six more to Guangzhou from March 2005.
Okun, who participated in the bilateral aviation talks said the hub would give the Atlanta, Georgia-based firm unlimited international frequencies to and from Shanghai.
But competition is heating up. UPS is not the only express service company waiting to capitalize on the mainland’s rising foreign trade which surged 37.1 pct to 851.21 bln usd last year and is expected to rise another 17 pct to 1.0 trln usd this year.
Its arch rival FedEx Corp (NYSE FDX) unit Federal Express (FedEx), the other US cargo carrier currently servicing the China-US market, has applied for 12 additional weekly frequencies to the country on top of the existing 11, and has said it may set up a hub in the southern city of Guangzhou.
