UPS taps Manila freight carrier

United Parcel Service (UPS) says its agreement with Pacific East Asia Air Cargo Airlines (Peac) to fly between Hong Kong and the Philippines is only a temporary measure until UPS can get its own beyond rights from the SAR.

UPS signed the agreement with Peac, a sister company to Philippine Airlines under the control of controversial tycoon Lucio Tan, before opening its intra-Asia hub at the former Clark Air Base in Pampanga in April.

The agreement calls for the Philippine carrier to operate an Airbus Industrie A300 freighter for UPS six times a week, Monday to Saturday, between Clark and Hong Kong.

That size of aircraft is comparable to the Boeing 757 and 767 freighters that UPS operates on its own in Asia.

UPS regional vice-president of airport operations Tom Murphy said while UPS was happy with the level of service from Peac, the company's preference would be to fly that route with its own aircraft.

However, that is not possible at present because UPS does not have carry-on, or fifth freedom, rights on flights from Hong Kong that originate from the United States.

"We have an on-going agreement with Peac to operate that segment because we have no traffic rights to do it ourselves. So short of our own traffic rights, we had to find some other way to do it. It would be the eventual hope that our US to Hong Kong flights will carry on to several points, including one to Clark," Mr Murphy said.

UPS had hoped air services negotiations between Hong Kong and the US would have wrapped up in March with an agreement for expanded onward rights for cargo flights from Hong Kong.

However, the talks closed without much indication that such an agreement was forthcoming.

A new round of negotiations are now expected to take place next month.

US carriers only have eight fifth freedom rights per week from Hong Kong between them, five of which are held by Federal Express (FedEx).

The remaining three were granted to Polar Air Cargo by the US Department of Transportation (DOT) a year ago, much to the disappointment of UPS.

At the time, UPS said DOT's decision "misses an opportunity to enhance international trade while bringing additional jobs to the US".

The company has been a vocal advocate for the two sides to come to agreement on what it calls a "realistic" programme of air services liberalisation, as opposed to the demand for open skies that has characterised the position of rivals such as United Airlines and FedEx.

Mr Murphy said the Hong Kong to Clark segment was an important route for UPS' service network in Asia and beyond.

"It's a major and important route, that's why we need to operate it ourselves," he said.

UPS president of Asia-Pacific Charles Adams earlier explained it was necessary for integrators to handle their own traffic on major routes throughout their network, such as Hong Kong to Clark, to ensure the integrity and security of service.

"You can't afford to have a black hole on a major part of your network that you can't keep track of for customers," Mr Adams said.

Mr Murphy said once UPS could secure onward rights from Hong Kong for itself, the company would immediately revert to its own aircraft for the route.

However, he said UPS would try to work out an alternative deal with Peac where the two could continue their working relationship in Asia, possibly on routes between Clark and Vietnam or southern China.

"Our agreement with Peac is an on-going one, but we would only need to give them a reasonable period of cancellation. But we would look hard to find ways to keep working with them," he said.

"We are not unhappy with Peac, we are unhappy with the fact that we do not have onward rights from Hong Kong," Mr Murphy said.