Fedex regrets leaving Subic Bay?
 

I am a crusty old freight dog and retired a year a go, but my buddies are telling me there is a growing opinion that FedEx is regretting their decision to relocate the Asia/Pac hub to Guangzhou and leave Subic Bay. I'm curious if anyone has heard similar stories on the crew bus at Memphis. Happy holidays to all and I don't miss driving the MD-11 one bit.

:D

Recent statement by Fred Smith himself was it is becoming increasingly difficult to do business in China.

I liked Subic ... hope we go back again

Same here at UPS in Shenzhen...slot allocations, customs, silly rules, gotta love the Philippines!

Tough to recover burps in the system since the PRC is tight with extra slots!

Pretty sure the extra Airbus sits Stby in Manila for this very reason.

The relocation to China was a business ploy to gain more access to China, however UPS and FedEx were naive thinking the Chinese would just open up their country and let them operate at will. Never gonna happen.

FedEx (and other carriers) would be better off operating in a country such as the Philippines, but I think they have already figured that out.

Takes only one turn (or layover) in Guanzhou to know that it was a mistake. Most of us knew it the first week.

That joint is a pain in the a$$ compared to Subic.

PIPE

People underestimate china's anti-competitive actions when competing with their national companies. Look at every other business working in China or competing with their national companies, and you'll see a top ten list of how China will tighten the restrictions on foreign companies, change the rules at will, delay certifications or recerts that almost kill the foreign company. If and when china decides to nationalize their cargo carriers, UPS and FedEx will be in big trouble. They'll be essentially forced out and just think about how much the Asian revenue is for both companies. That's the big risk.

Now saying that, i would take that risk in working for either one of those companies over a US Pax airline anyway, which has to deal with all of the other garbage but it's US borne!

+1

There's more than a few reasons many SFS guys were domiciled there for years vs. the 2 year revolving door that HKG has become.

I think this is a case that FedEx pilots regret leaving SFS more than FedEx regrets leaving SFS. Most of the initial problems with CAN have been resolved and it operates a lot more smoothly...still issues but definitely improving. I seriously doubt we'll ever see anything in the Philippines that will get us good layovers again.

Correct. Management at FedEx will only regret leaving SFS if it affects their yearly bonus.

I've also heard a rumor that says that our bonehead MEM lawyers didn't see the part of the contract where the Chinese inserted language that specified that FDX turns over the entire facility and all capital improvements should they ever leave GZ. That means the "state of the art" sorting equipment, computers and software all go to the Chinese, along with the building.

Hmmmmm..... now let's take a look at what Chinese national airline also happens to be based in GZ and is standing up a cargo operation...... Can you spell "China Southern????"

It's unfortunate that the MEM lawyers and others there decided that the input from people living in Asia and/or flying to China on a regular basis were so ignorant on matters relating to contracts with China or Chinese entities. The input from those in the know was politely set aside by those with advanced law degrees from prestigious US schools.

It also seems that UPS was "Shanghaied" by the Chinese after they build their hub in Shanghai, and "Shenzhenied" when they set up the new one in Shenzhen.

It really is a shame that someone that graduates from Harvard, Yale, or any other law school would be so shamefully dedicated to ignoring the input from those that are in China on a very regular basis. Seems like they were just too busy looking at the Chinese fire drill than to actually pore over the contract and it's contents to protect their employer's interest. The fell, lock, stock and barrel for the typical Chinese bait and switch.

How does the Singapore "mini-hub" fit into the scheme?

Guess they never heard of communism and never understood what that meant when you invest in infrastructure within that system.

Move our **** to Clark and light that joint in CAN on fire when we walk out the door. They can have the pile of rubble.

You honestly believe that?

FDX would not be the first company to find themselves in this position.

Ok, can you give some examples?

With all due respect, if you think that there is not a massive, systemic problem with IP loss in China you need evaluate your news sources.

I think you hit on something that Lee Moak has brought up and is very concerned about. He has discussed his concerns with the incredible growth of the Chinese and Middle Eastern airlines, in both the pax and cargo side.

I for one, never understand why the Company doesn't seek the advice of their foreign domiciled pilots with every large international decision they make. We all know that line pilots make excellent businessmen and advisors on multi-billion dollar deals - after all that's why they're pilots.

He did not suggest talking to pilots.

"It really is a shame that someone that graduates from Harvard, Yale, or any other law school would be so shamefully dedicated to ignoring the input from those that are in China on a very regular basis."

I know such people. None are pilots. The point is that there is a body of knowledge from those working with "Chinese Partners". Some are managers, some are engineers. All tell the same story, and it points back to American senior managers (marketing and CEOs more than lawyers) selling the company IP for short term gain. In one case that I have second hand knowledge of it was nuclear technology.

So yea, some Chinese "partner" having rights to a sort facility? Only a fool or an MBA would doubt it.

............

Oil companies in the Middle East in the 1950s and 1960s.

Spent millions on building infrastructure....and then many of those oil fields and refineries were "nationalized".

Excellent question/observation --- I can see how Singapore would be a great "middle solution" between China and the PI.

Venezuela:

Venezuela to nationalize U.S. firm's oil rigs | Reuters

In context
 

Yes. Uncle's law firm had an office in Shanghai for a couple decades. When it became impossible to get documents across town they decided to have offices on opposite sides of the city. Through a very public, celebrated and exemplary course of cooperation and coordination over a few years, the firm was chosen to be the initial business in an area the Chinese were pushing as their showcase rennovation of an older part of the city, as well as the anchor in the new financial business area. Deals were brokered for use of local architectural firms, construction, materials, outfitting, electronics and even local employment.
After four years the simultaneous ribbon cutting ceremonies were at hand, hosted by Ministers of Commerce, Trade, ad nauseum. As the CEO of the firm was glad handing the dignitaries, one asked which of the buildings they would occupy. Not quite understanding the query he said they eagerly awaited immediately seeing to their clients needs come the start of the business week. The interpreter then relayed the news that it would be quite impossible as Foreign law firms were only permitted to open one new office every 18 months - a local law enacted only three months prior, by those with full knowledge of the firms' efforts and whom had been intimately involved in the projects. One of the buildings sat idle for the year and a half.

He told me this anecdote in response to me asking him a few years back what he thought of FedEx opening a domicile/hub in China. His assessment of the LOA was comical.

Well, Fred Smith is a Yale Grad.

Actually, more manufacturing is coming back to the USA. China has a labor shortage (ex. A320 Capts getting 200k a year). Multinationals are freaked out over supply-chains. As the tsumami and floods in Thailand have shown. Honda is upping production in Ohio. So there will be less goods coming from Asia. Unless Fedex and UPS change their business model they will be in trouble.

Thanks for sharing your opinion, but I doubt if I or anyone else at FedEx will loose even a moments sleep over your comment.

The argument you make actually helps FDX and UPS to some degree. China and India over the next decade will consume more and more. A balanced trade between the U.S. and Asia creates more efficiencies in the FDX and UPS model (ie. not empty jets coming from U.S. to Asia and full ones coming back). If you have been to China recently, there is a huge appetite for U.S. products (albeit now mostly "knock-offs"). An increase in manufacturing in the U.S. with an increase in consumer demand in Asia is good for FDX. Just my opinion. I personally think the biggest threat to profitability for FDX an UPS is political, the increasing desire to impose trade barriers by all countries.