The decisions by United Parcel Service and DHL to launch Asian hubs commit all four of the big express cargo carriers to the Orient. The question now is which of the differing strategies will work and whether they will avoid the bloody shakedown that followed a similar scramble four years ago in Europe.

'Asia has become the locus of activity,' says Lee Hibbets, research director for Seattle-based consultants, Air Cargo Management Group. Fuelled by visions of quadruple growth over the next two decades, Asia tops the global expansion plans by all the integrated express cargo carriers. TNT Express entered Asia several years ago; FedEx opened its Subic Bay hub last year; and in March DHL's long-delayed Manila hub opened. UPS expects to launch a mini-hub at Osaka/Kansai by July and aims to open the main hub in Taipei by September.

Charles Adams, UPS Asia-Pacific vice president, expects to sign a final agreement clearing the way for the establishment of the Taipei hub by mid-June. If the carrier is granted route rights to Manila and Bangkok, UPS could serve seven Asia cities from Taipei and one with full traffic rights from Osaka. The portion of its Taiwan cargo that must be trans-shipped is still under negotiation, but the authorities, in a bid to protect local carriers, say it should be at least 75 per cent.

The deal with the Taiwanese authorities has handed UPS an apparent victory over one of its main rivals. But FedEx denies UPS' hub has preempted the Memphis-based carrier's own plans to set up a hub in Taiwan, although Taiwan officials claim UPS 'beat out' FedEx. Adams simply notes that the airside site designated for UPS at Chiang Kai-shek airport is the only currently available space. Construction work to create extra cargo handling capacity will take 18 to 24 months to complete. FedEx insists it will build a Taiwan hub which will eventually dwarf Subic Bay, despite the fact that it remains at odds with local officials and has filed complaints with the US authorities.

The four main express carriers are pursuing different strategies. FedEx and UPS are focusing on linking Asia to their US networks, while DHL and TNT are placing more emphasis on intra-Asia traffic. FedEx operates its own fleet, while UPS just acquired two B747 freighters for its Asia operations, but is also talking with Nippon Cargo Airlines about sharing capacity. DHL uses third-party uplift.

The big unknown is whether Asian shippers, who have longstanding relations with local freight forwarders, will switch time-sensitive cargo to these new entrants. FedEx recently boosted nightly Subic Bay flights from five to seven, but is still having to fill excess capacity with general cargo. This should sound a warning to express carriers flying their own fleets in a market so dependent on personal ties, says Hibbets.

David Knibb

Source: Airline Business