FEDEX Returns To The Philippines

Will Now Rely Less on Guangzhou Hub

8 October 2020

U.S.based courier Federal Express (FedEx) has announced its $30 million investment in the Philippines as it develops a new regional cargo terminal at Clark Air Base in Pampanga, as the U.S.-China trade war intensifies forcing the company to rely less on its Guangzhou hub.

The company said construction of the new and larger gateway, which began late last year, will be completed by first quarter of 2021 and will start operation in April 2021. 

The two hectare facility will be expanded in phases, as it triple FedEx's sorting capability in the Philippines to 9,000 documents and parcels per hour initially. The facility will also have dedicated areas to process large heavyweight freight. 

Fedex in a company statement said, the investment in Clark will bring the total number of team members to more than 800 workers surpassing FedEx's former facility at Subic Bay.

"This facility is the latest in a series of strategic investments that FedEx has made in the Philippines and across Asia-Pacific to enhance coverage and improve service levels in this important region," John Peterson, managing director at FedEx Philippines.

The Clark facility will house initially the company's expanded Philippine operations to service Covid19 vaccine delivery next year.

FedEx moved in 2009 its regional hub to Guangzhou from Subic, a former U.S. naval base turned industrial zone, which had served as its hub since 1995.

FedEx maintains however that it is keeping its Asia Pacific hub in Guangzhou for now.

“FedEx is not relocating and has no plans to relocate its Asia Pacific Hub, for now.” says Peterson.

“Our planned operations in Clark will enable us to better serve our customers in the Philippines and are part of our ongoing expansion throughout the Asia-Pacific region as our business continues to grow,” the company said.

Why FEDEX lose?

Federal Express must follow Philippine Law on Public Utility Ownership, similar to those employed by AirAsia and Tigerair

31 August 2013

By Ricardo J. Romulo

It was a surprising pronouncement made by the Fourth Division of the Court of Appeals. Issued in its Jan. 23, 2013 consolidated disposition of the cases of Merit Freight International Inc. and Ace Logistics Inc. both against Federal Express Pacific Inc. (“FedEx”), which were respectively docketed as CA – GR Sp. No. 119658 and CA – GR No. 121661, the decision delivered a message of a different kind.

It was clearly an intended signal. In its resolution of June 6, 2013, of the motion for reconsideration of FedEx, the court remained adamant and held that “after a meticulous study of the arguments set forth…” it found “no cogent reason, to revise, amend, much less reverse,” its decision made a few months earlier.

The flow of the Fourth Division of the Court of Appeals’ syllogism appeared impeccable: FedEx was admittedly a “foreign corporation.” Ergo, it was disqualified under our Constitution and laws from operating as an “International Airfreight Forwarder.” Reason? Because it was, at least to the court, “clearly a public utility.”

The legal basis for the disqualification was Section 11, Article XII of our present Constitution. In its relevant portion, that provision states that “no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens…”

That mandate of the Constitution, though seemingly simple and familiar, was nevertheless subject of debate when we discussed it at the Constitutional Commission of 1986. In his sponsorship speech, Constitutional Commission member Bernardo M. Villegas, chair of the Committee on National Economy and Patrimony, admitted that “the Committee was divided” on “the question of foreign participation in the ownership of public utilities.”

On the floor of the commission, both during the period of interpellation and the period of amendments, the division was very palpable.

But the division was focused mainly on how much foreign ownership of public utilities was to be allowed. The members of the Committee on National Economy and Patrimony, at their level, riding with the tide of nationalism that was prevalent at the commission, had agreed to raise the then prevailing 60-percent Filipino minimum ownership under the 1973 Constitution to 66 percent and 2/3 percent.

Commissioner Jose Luis Gascon, during his turn to interpellate, pushed the envelope and asked if it was possible, in the interest of ensuring the common good, to further suggest, during the period of amendments, the increase of such minimum to 3/4 percent.

When everything was said and done, however, at the final voting, the old rule on the ownership of public utilities prevailed: at least 60-percent Filipino and no more than 40-percent foreign ownership, the same as it was, going back as early as the 1935 Constitution.

So, what was the surprise sprang by the recent Court of Appeals decision on FedEx? It is this: All along, most of us at the commission, myself included, had presumed that what was meant by “public utility” in the rule limiting foreign ownership was a “public utility” that was operating within the Philippines.

The place where the public utility operated was the bedrock of our conviction that it was prudent, for the protection of the Filipino public in the Philippines, who were the ones being served by the utility, to insist that the significant ownership of that utility be in the hands of Filipinos.

Our premise was accepted by those who implemented the law. The Department of Justice, on Nov. 9, 2004, in a letter addressed to then Civil Aeronautics Board executive director Tomas T. Mañalac, thought it timely to issue “a definitive opinion… after a careful and exhaustive review of the aforecited opinions, considerations of sound public policy and national interest, side by side with the pertinent constitutional and legal provisions, as well as doctrinal pronouncements on the matter.” Dispelling doubts that had been spawned by certain wayward opinions, then Justice Secretary Raul Gonzalez unequivocably opined that the nationality requirement applied only to domestic air commerce and/or air transportation and, to stress, it did not apply to international air freight forwarders.

Similarly, the general counsel of the Securities and Exchange Commission, Vernette Umali-Paco, in her letter, dated Oct. 29, 2008, to lawyer Agerico T. Paras rejected the idea that a foreign corporation, in the business of air freight forwarding, could bypass the constitutional requirement and conduct its business in the Philippines by simply “buying space” from domestic shipping lines and airlines.

Such a notion that it was just “buying space” (and not doing business) could not ignore the fact that the foreign corporation would in a sense be acting as a public utility in the Philippines.

It is clear that the demarcation line, observed by the implementers of the law, that distinguishes a utility serving the public domestically from a utility that terminates its services once it unloads or uploads in the Philippines, is a crucial one. It is a point of balance that must be maintained, between our being open to the world of commerce beyond our borders and our objective to be in control of public utilities (i.e., PAL Cargo, LBC Express, Air 21 and Cebu Pacific Cargo) offering their services to the domestic market.

Ricardo J. Romulo is a senior partner of Romulo Mabanta Buenaventura Sayoc & De Los Angeles.

Why FEDEX Can't Fly

FEDEX must be Filipino Owned

By Edu Punay



22 July 2013

The Court of Appeals (CA) has effectively stopped the operations in the country of international forwarding firm Federal Express (FedEx).

FEDEX has to comply the 40% Ownership to fly the Philippines

The fourth division of the appellate court last week voided the permit granted in 2011 by the Civil Aeronautics Board (CAB) to Federal Express Pacific Inc.

The CA ruled with finality that FedEx’s operations in the country violate the constitutional ban on foreign ownership of firms delivering public utility services.

In a two-page resolution released last week, the CA denied the motion for reconsideration filed by FedEx.

Instead, it affirmed its decision last Jan. 23 which held that FedEx is a foreign corporation and could not engage in public utility services such as international airfreight forwarding.

The court reiterated that FedEx’s operations are detrimental to the interest of local competitors and of the Philippine economy as a whole.


“We hereby declare respondent Federal Express Pacific, Inc., a ‘foreign corporation,’ disqualified in our country from operating as an ‘international airfreight forwarder’ which is clearly a public utility,” read the ruling penned by Associate Justice Danton Bueser.

Associate Justices Amelita Tolentino and Ramon Garcia concurred in this decision.

With the new ruling, the May 2, 2011 resolution of the Civil Aeronautics Board (CAB) granting Federal Express Pacific Inc. a regular permit to operate international airfreight forwarding has been “null, void and of no further force and effect.”

As basis, the CA cited Article XII Section 11 of the Constitution, which provides that “operation of a public utility shall be granted to Filipino citizens or to corporations or associations organized under the laws of the Philippines.”

The CA was ruling on petitions filed by Merit Freight International Inc. and Ace Logistics Inc., questioning CAB’s decision to grant FedEx a regular permit to operate international airfreight forwarding.

In questioning CAB’s decision, Merit argued that international airfreight forwarding is a public utility reserved for qualified Filipino individuals and corporations as embodied in the 1987 Constitution.

Ace, for its part, said CAB erred in granting permit to operate to Federal Express Pacific Inc. despite the fact that it is a 100 percent foreign-owned and foreign-based corporation.

In granting the petitions, the CA also cited a previous resolution by the CAB dated June 1, 1990, directing Royal Cargo Corp., a company whose president then was a foreigner, to relinquish its top position to a Filipino national in accordance with Article XII Section 11 of the 1987 Constitution.

Royal Cargo questioned CAB’s resolution before the Court of Appeals, which ruled that the petitioner is covered by restrictions embodied in the 1987 Constitution.

The court also rejected Federal Express’ argument in its appeal that Merit has no legal standing to question its application for a regular permit and no personal stake in the outcome of the case.

The CA ruled that Merit, as a citizen, has the requisite locus standi – or the right to bring an action to be heard in court – to question the matter.

FedEx adieu

FedEx flies out to China

Written by Henry Empeño / Correspondent

Monday, 09 February 2009 22:30

SUBIC BAY—The mighty FedEx birds have flown, and Subic might never be the same again. On Friday, February 6, starting at 2 a.m., a fleet of eight Airbus-A310s and four MD-11 aircraft made a beeline to Taxiway C of the Subic Bay Airport. Hours before, the planes were topped off with fuel, checked by technicians and loaded by hub operations agents with cargoes bound for destinations like Taiwan, Vietnam and Hong Kong. It was a reprise of what has become a daily routine in Subic since the air cargo giant Federal Express (later to become FedEx Corp.) established its Asian hub here in 1995. Except that this time, the planes were not coming back, perhaps for good. As the aircraft taxied for takeoff, their familiar bulk nosed through a curtain of water sprayed by a fire truck on standby—a farewell gesture that signaled the end of an era at the Subic Bay Free P wort. The last cargo flights out of Subic on Friday actually started the transition period for FedEx’s transfer of its Asia-Pacific hub from here to Guangzhou, China, said Armand Arreza, administrator and CEO of the Subic Bay Metropolitan Authority (SBMA). FedEx, Arreza said, has started to test-run its new facilities at the Baiyun International Airport, the main airport of Guangzhou, the capital of China’s Guangdong province, after operating in Subic for 13 years. But the pullout, Arreza explained, was borne out of competition—not by the ongoing global recession. “The decision was made as early as 2004, even before the global economic slowdown last year began to affect Asian economies,” Arreza pointed out. “The market condition in China dwarfs that of the entire Southeast Asia combined,” he said, citing that China accounts for some 60 percent to 70 percent of Asia’s cargo traffic. Moreover, China dangled to FedEx the incentive of cabotage, which would allow the American firm to handle domestic cargo in China. “Here, the Philippine Constitution allows cabotage for domestic companies only,” added Arreza. CARGO trolleys lay idle at the FedEx Subic hub after operations crew fi nished loading the last planes to fl y out of the Subic Bay International Airport. HENRY EMPEÑO Lost income, lost jobs The decision, nonetheless, would result in the contraction of SBMA’s income by about P150 million annually—the fees paid by FedEx for landing rights and warehouse rentals. Landing fees by FedEx, in particular, made the bulk of revenue generated by the Subic Bay International Airport (SBIA), which was practically rehabilitated in 1994 to accommodate FedEx’s cargo flights. According to SBIA records, FedEx logged in an average of 1,000 flights a month, with international flights almost double the domestic runs. At its heyday here, the cargo firm had 12 inbound and 12 outbound flights on a regular night, with its fleet of Airbus A310s carrying as much as 35 tons each and the wide-bodied MD11s loaded with up to 89 tons of cargo each. FedEx’s transfer to China also displaced more than 500 workers, mostly from Olongapo City, who were variously employed in sorting documents and freight, warehousing, ramp operations, as well as in aircraft maintenance, logistics distribution and ground support. Earl Esmane, a part-time hub-operations agent from Olongapo, said the part-timers, who composed of about 70 percent of the FedEx hub crew, were paid P60 an hour for the usual four-hour nighttime shift. The full-timers, however, received higher base pay, he said, adding that some regular employees had received offers to relocate to FedEx hubs in Hong Kong and Taiwan. Esmane, who had completed his clearance with the company as early as last month, has yet to receive his separation pay. However, a FedEx official said on Friday some officials would remain in Subic to oversee the completion of the firm’s reintegration program for its workers. Farewell regrets As the last FedEx plane took off on Friday, FedEx assistant chief pilot Joel Edmondson expressed some regrets about pulling out of Subic, saying that the FedEx hub here has been “very successful” since it was established in 1995. He reiterated, however, that global economics dictated that FedEx had to relocate to China. “It’s not a matter of Subic being not good enough to [FedEx],” Edmondson said. “This is an economic decision that puts us in a better position to move forward in the market.” Ironically, it was the same market force that had brought FedEx to Subic Bay in the first place. Noting the significant increase in the cargo market in Asia in the late ’80s and early ’90s, FedEx reportedly decided to establish a strong presence in the Asia-Pacific region, with the strategy to build an “Asia One” hub in Subic and, thereafter, adding more “spokes” to the hub. In 1993 FedEx began negotiating with the SBMA for the use of the former US Naval Air Station in Subic—a year after it closed down as a result of the Philippine Senate’s rejection of the treaty extending the stay of US bases in the country. The following year, FedEx signed a contract with the SBMA and the latter began rehabilitating the airport runway and procuring international-standard navigational equipment to meet its client’s requirements. On September 1, 1995, FedEx launched the Asia One network in Subic, thereby setting up an overnight intra-Asian delivery network connecting 11 major Asian centers. The following year, FedEx expanded its operations to include regular all-cargo flights directly linking Shanghai with its Asia-Pacific hub, thus getting the first taste of the burgeoning Chinese market. FedEx would soon expand in 1999, adding eight more aircraft to its 12-plane fleet and signing an extension of its lease agreement from 2002 to 2007. By 2001 the FedEx Asia One network in Subic has grown to include 19 destinations in Asia, so that in May 2004, it opted to extend its contract with the SBMA for up to August 2010, with options for three successive renewals of one year. However, in July 2004, FedEx announced it has opted to transfer to Guangzhou by 2008, a decision that, it said, was based on an exhaustive series of feasibility studies that recognized the tremendous business potentials in China.

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.