In a deal bound to increase competition for the high-value trade moving by air between the United States and China, DHL last month signed a letter of intent to pay US$150 million for a 49 per cent stake in pure freight operator Polar Air Cargo.
The deal, which will give DHL 25 per cent voting rights in the company owned by New York-listed Atlas Air Worldwide Holdings, also includes a 20-year agreement expected to reserve for the giant German shipper up to 50 per cent of Polar's capacity across the Pacific. It is expected to be finalised within three months.
Although loath to publicly say so, DHL has been struggling lately to find enough scheduled transpacific lift at the right times from Asia to the US. With freight shipping demand in the region growing, the shortage looks set to grow more acute.
At present, most of the operator's transpacific business is carried in the belly of passenger flights by long-time partner Northwest Airlines under a commercial agreement set to expire mid-2008. The US carrier has been a reliable supplier for DHL over the years but with exports from China booming, Asia's biggest express operator needs an alternative.
Compounding the problem, Airbus's much harped on delay to its A380 programme not only set back by six months the introduction of the European company's 155-tonne capacity freighter, it is also limiting the number of older wide-bodied passenger planes available for conversion to all-cargo format.
Plus, cargo companies such as DHL that depend on commercial uplift are being hit by the belt-tightening of debt-weary US airlines. Their recent reduction of service across the Pacific may have produced impressive passenger load factors of 81 per cent in the first nine months and returned some carriers to profitability but it has cut space in their aircrafts' bellies to move cargo.
With the Polar buy, DHL will solve its space shortage.
