FedEx Corp. to Close Hub in Philippines, Build New $150 Million Hub inGuangzhou, China.
In a move to exploit China’s fast-growing market, FedEx Corp. said itwill close its Asian hub in the Philippines and replace it with a new $150 million facility inGuangzhou, southern China. The new cargo-handling center at Guangzhou’s Baiyun International Airport,scheduled to open in December 2008, will better serve clients doing business in China, thecompany reported in a statement.
FedEx predicts air freight from China to the United States will grow an averageof 9.6 percent a year over the next 20 years. FedEx’s announcement comes after rival United Parcel Service Inc. said last weekit will open an air cargo hub in Shanghai as part of efforts to launch a domestic Chineseexpress-delivery service this year. FedEx said it has no such plans. The Subic Bay, Philippines, facility, located at a former U.S. naval base, willclose by the end of 2008, by which time the Guangzhou operation will be in service, according toFedEx, the world’s largest cargo airline. “We do not need two Asia-Pacific hubs,” FedEx Chief Executive Frederick Smithsaid at a news conference in Guangzhou. “As markets change, growth patterns change, you have to gowhere your customers go.” Smith said the runway at Subic Bay cannot accommodate the Airbus A380-800freighter and cannot be expanded. FedEx has placed an order for 10 of the aircraft.
Last year, FedEx extended its Subic Bay lease to 2010 and took an option to usenearby land at the former U.S. military base at Clark Field. The Philippine government transformed Subic Bay — a deep water port located 50miles west of Manila — into an economic and tourism zone after its lease to the U.S. expired in1992. Philippines Sen. Richard Gordon, who negotiated the establishment of the hub in1995 as the first head of the Subic Bay Metropolitan Authority, said he was saddened by FedEx’sdecision. “Personally, I am devastated,” he said. “I wanted them to be very happy inSubic.” It wasn’t immediately clear how many jobs will be eliminated. FedEx said it will keep as many of its more than 750 employees at Subic Bay aspossible. Fired workers will receive severance double that required by Philippine law, the companysaid in a statement. FedEx said it will also offer re-employment counseling and training. The 155-acre Guangzhou facility will have floor space of 882,000 square feet andbe able to handle 24,000 packages an hour, the company said. It will hire 1,200 peopleinitially.
