FedEx chairman seeks reciprocal cargo access for U.S., Europe markets
Frederick Smith, chairman and president of global express company FedEx, urged European leaders Monday to lift protections on domestic air cargo markets as an interim step towards a comprehensive open aviation market with the United States.
In a wide-ranging speech to European policymakers and journalists in Paris, Smith said he favors full access for European express carriers in the United States in exchange for allowing U.S. companies to operate freely in the European Union. He singled out the United Kingdom for slowing U.S.-EU negotiations by holding out for a complete aviation agreement instead of first phasing in a less controversial treaty for all-cargo airlines while continuing work on liberalizing passenger markets.
“FedEx would support a completely unrestricted transatlantic all-cargo aviation agreement, including reciprocal access to U.S. markets. To accomplish this, we believe the best approach is to allow airlines on each side of the Atlantic to wholly own airlines in the others’ territories. U.S. all-cargo carriers should be able to own 100 percent of a European carrier, and European all-cargo carriers should be able to do the same in the United States,” Smith said, according to a text of his prepared speech.
FedEx and UPS have long pushed for greater freedom to set up subsidiaries, ground operations and more air routes in Europe. The two logistics giants are on record supporting international open skies and liberalized traffic rights and foreign investment rules. The United States has open-skies agreements with many European countries, but the lack of an agreement with the United Kingdom means FedEx cannot provide direct air delivery from third countries — only from the United States.
Smith’s comments suggest a realization that no more is to be gained by trying to keep European delivery company DHL out of the U.S. domestic market. FedEx and UPS have challenged DHL’s right to operate a U.S. airline under U.S. citizenship laws, but regulators have repeatedly ruled that DHL Airways and its successor, Astar Air Cargo, are owned and controlled by Americans. DHL bought Airborne Express in 2003 and is rapidly building its U.S. ground network to challenge FedEx and UPS.
Smith said the granting of full international rights would align U.S. and EU standards much faster than trying to harmonize regulations one by one.
FedEx is gearing up to facilitate the growth in European trade by adding more capacity, Smith added. The FedEx founder said adding the Airbus A380 super jumbo jet to its freighter fleet will provide FedEx big efficiency gains.
The A380 is under development and expected to make its commercial debut in 2006. FedEx is the original launch customer for the A380 freighter variant, with the first of 10 planes scheduled for delivery in 2008. UPS said last week it also placed an initial order for 10 planes.
“The A380 provides significantly lower direct operating costs than the largest aircraft flying today. Without the A380, FedEx would need many more intercontinental flights to handle the same volume. The aircraft will certainly give us greater network capacity between Europe and Asia,” Smith said.
FedEx will increase its transatlantic capacity more immediately by introducing in March five weekly directly flights from Cologne, Germany, to the main FedEx hub in Memphis, Smith said.
The 20 percent increase in westbound capacity will provide extra next-day service and later pick up times of up to three hours for shippers in Germany, Belgium and the Netherlands.
Smith also called for reform of customs and other regulatory rules, such as restrictions on night flights at some airports that impede overnight delivery services. Customs clearance procedures account for as much as 25 percent of delivery costs.
“Progress has certainly been made on the customs clearance front, but there is much more work to be done if we are to become a truly fast-cycle economy. This is an issue all world trading partners must address promptly to keep goods flowing across borders rather than queued up on the dock or runway,” he said.