Air cargo rivals Federal Express and UPS are poised for a Pacific Rim battle after new fifth freedom rights were granted by the USA under a US-China agreement, allowing for more service through Hong Kong.
The US Department of Transportation (DoT) says its planned beyond-Hong Kong rights will let the two companies link their Asian operations with Europe.
UPS plans to elevate Hong Kong to gateway status with an investment of as much as $100 million. It has made Shanghai its headquarters for Greater China, but the new rights will allow it to fly between that city and Cologne-Bonn, its European hub.
For FedEx the move is timely, coming on the heels of an impasse in US-Philippine talks on open skies. FedEx says the new rights will accelerate a build-up of its hub at Subic Bay, Philippines, and give more feed for its European hub in Paris.
Under the DoT allocation, UPS will receive 12 of the 18 frequencies it seeks, and FedEx will get 13 of the 18 it wants. That gives these two integrators 25 of the 40 new frequencies allowed, while the DoT distributes the rest among four other carriers. Of these, Northwest Airlines has won four and Polar Air Cargo five, while Michigan-based Kalitta Air takes four and Evergreen International gets two weekly frequencies. Their plans for these routes include more services to destinations in South Korea and the Philippines.
David Hoppin, principal of cargo consultants MergeGlobal, says: "The DoT decision clearly favours the integrators, which will likely benefit many shippers, but it does not support the non-integrated carriers and forwarders and their network needs." Polar Air Cargo engaged MergeGlobal to argue its case.
The USA estimates that more than 250,000 tons (227,000 tonnes) of air cargo are handled between the USA and Hong Kong each year, with 75% of that total flowing eastbound. Under the previous US-Hong Kong bilateral, only eight weekly fifth freedom cargo rights were allowed.
The new US fifth freedoms are part of a three-year phase-in, the next stage of which will see 16 more frequencies doled out by the DoT next year.
China granted its first-ever fifth freedom rights from the mainland earlier this year with clearance for Singapore Airlines to fly between Chicago and two points, Xiamen in Fujian province and Nanjing in Jiangsu province.
DAVID FIELD WASHINGTON
Source: Airline Business
