DHL looks to Cathay for expansion in the region
DHL Worldwide Express' expansion plans in Hong Kong, which include the lone bid for the dedicated express terminal at Chek Lap Kok, have seen the integrator start the search for a dedicated freighter fleet, according to a top executive.
John Mullen, DHL Worldwide Express (Asia-Pacific) chief operating officer, said one of the options being examined for its continuing expansion was the joint purchase with Cathay Pacific of a mid-range fleet of cargo aircraft.
"We need to expand and joint fleet ownership with Cathay is one of the possibilities we are looking at for the next stage.
"Our expansion plans have reached the stage where we have begun looking for a fleet, but we have not made any decisions on what type of aircraft we want to purchase," Mr Mullen said.
Last month, an aviation source told Business Post the fleet would bear Cathay colours and probably comprise Airbus A-300s, Boeing 757s or a mix of both.
These mid-range aircraft, ideally suited to the intra-Asia market, cost between US$100 million and US$125 million each.
The new venture would feed cargo into Cathay's long-haul network through the new express centre and link up with the massive China market through agreements being forged with China Southern Airlines and China Eastern Airlines, the source said.
DHL serves its growing intra-Asia market by sending time-definite cargo on overnight flights to Osaka, Seoul, Taipei and Singapore using the belly space of Cathay passenger aircraft.
The three-year agreement with Cathay expires next March and Mr Mullen tipped a decision on DHL's expansion plans would be made by the end of the year.
"As your cargo network and volumes expand it becomes increasingly difficult to serve that through passenger airline networks.
"So eventually we have to operate a dedicated fleet in Asia , especially if our bid for the express terminal is successful."
As DHL is the only bidder for the terminal and because the Airport Authority has made the express industry a priority, it is thought the success of its bid is a virtual fait accompli.
Mr Mullen told delegates at a logistics conference hosted yesterday by the Hong Kong University of Science and Technology that Hong Kong was Asia's second-biggest express market.
He said all DHL's volume generated in the Pearl River Delta moved through Hong Kong and that the delta generated 20 per cent to 25 per cent of the firm's intra-Asia volume.
Mr Mullen's comments followed an announcement this week by parent company Deutsche Post World Net that it would this year boost investment in Asia, where it was the market leader in international express freight.
Group chief executive Klaus Zumwinkel told German daily newspaper Handelsblatt its global express unit DHL Worldwide and logistics subsidiary Danzas Group would be at the centre of these plans.
"Asia is for us a growth market, to which we are paying a great deal of attention," he said.
DHL was reported to have a 34 per cent share of cross-border services in Asia, ahead of United States-based rivals Federal Express and United Parcel Service.
"We are expecting to achieve the highest growth rates in the express business," Mr Zumwinkel said.
He predicted the intra-Asia express market would expand 10 per cent a year, while Asia-Europe would grow a comparative 12 per cent.
Express deliveries between Asia and North America were expected to expand 11 per cent.
DHL would put more than a third of its global investments into Asia, with the parent company already having invested about 300 million euros (about HK$2.18 billion) between 2000 and this year, Mr Zumwinkel said.
Asia accounted for less than 3 per cent of the group's US$30.4 billion in sales last year.
According to Washington-based consultancy MergeGlobal, the intra-Asia small-package express market is expected to show an 11.8 per cent compound annual growth rate from 1999 to 2005.
