Subic bids farewell to Fedex Asian hub

Politics killed FedEx Subic dream!

February 6, 2009

SUBIC BAY, Philippines — US cargo giant FedEx closed its Asian hub early Friday with the last flight, an Airbus 310, leaving for Taiwan just before dawn.
It will relocate to its new $150 million investment on an 82,000 square meter Guangzhou facility, which sits on 63 hectares Guangzhou Baiyun International Airport hub in Southern China.
Subic Bay administrator Armand Arreza said that February 5 was the last night of its full operation as an Asian hub. The FedEx hub, which began operations in May 1995, earned the Subic Bay authority about 150 million pesos (3.2 million dollars) from landing fees and warehousing in 2008 alone. It occupied 300,000-square foot facility and employed close to 800 people at its peak operation in 2004. Its final transition will be effected in April.

David Cunningham Jr., FedEx Express President for Asia Pacific, announced plans for a new FedEx Asia-Pacific Hub in Guangzhou in 2005. The company's lease contract in Subic expired in 2005 but was extended for another 5 years and was supposed to expire in 2010 but Fedex opted to end the contract earlier in 2007 as it wanted to consolidate its business operation in the Asia Pacific region in its planned China hub.

FedEx's has been one of the first locators in Subic Bay in Zambales province since the former American base was rehabilitated after the Mount Pintubo eruption in 1991. Senator Richard Gordon, then SBMA Chairman, lured Fedex to relocate in Subic after the United States closed its military bases in the Philippines in 1992. From its strategically located main hub in the Philippines, FedEx served more than 14,000 stations across Asia.

Its growing operational capacity for long term operations proved inadequate for Subic airport. As it plan for major expansion in 2004, Fedex was caught in a political struggle between SBMA and CIAC with the latter wanting them to relocate to Clark for its expansion. Meanwhile, SBMA wanted to expand its airport but was shutdown by Malacanang in favor of Clark airport. In the end political disputes led FedEx to consider alternative locations according to its local representative in the Philippines.

Chairman Arriza declared that the main reason for relocation is operational efficiency, as the market in China is way bigger than the entire market of Southeast Asia, and with plenty of space to grow Guangzhou airport fits the bill from the large cargo volume in China alone which Subic doesn't have.

The new Guangzhou hub will be FedEx's largest overseas facility outside the US. It will connect 24 major cities in more than 220 countries in the region where FedEx has had operations.

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