San Francisco – Now that DHL will be guaranteed freight capacity on Polar cargo aircraft for the next two decades, U.S. West Coast shippers are anticipating a softening of freight rates soon.
     “When you have more players operating in any trade lane, the pressure to compete on price is a greater factor,” said Anthony Joss, an air cargo analyst in Seattle, Washington.
     “This will give UPS and Fedex a lot more to worry about on the Transpacific routes.”
     DHL, the express delivery arm of Deutsche Post, industry analysts agree will be made even more competitive by virtue of having access to additional cargo space on Atlas Air—another subsidiary of New York-based Atlas Air Worldwide Holdings.
     “Warehousing is at a premium here,” said Joss.
     “This strategic partnering will mean that shippers will also have access to more of that space,” said Joss.
     But for many in the Pacific Rim shipping and forwarding community the move means more than just a price war.
     “The move is especially welcome because of the access it gives us in China,” said Adam Falcon, a freight forwarder in Tustin, California.
     “When the DOT (U.S. Department of Transportation) awarded Polar four more weekly legs to that market, we were pretty excited.”
     Given all the political concern in recent months over foreign investment in U.S. companies, however, the deal will no doubt be scrutinized closely by government regulators.
     The widely reported letter of intent signed by both parties gives Polar $150 million in cash from DHL in exchange for a 49 percent equity stake. This includes a 25 percent voting interest.
     “The government would be foolish to block this arrangement,” said a South San Francisco-based Customs broker.
     “As it stands now, there’s not enough capacity on existing routes to the Far East during peak seasons.
     “We need more competition there…not less.”
     Polar and Atlas combined operate the world’s largest fleet of 747 freighters.
     For California’s flower shippers, this means more space when volumes surge.
     “And traffic is much more balanced now,” said Alice Dupont, a shipper based in Redwood City, California.
     “We are sourcing almost as many roses as we ship. The whole business has been globalized.”
      Completion of definitive documentation, meanwhile, is expected to close late this year or early in 2007.
     As reported Polar will continue to operate as an independent company and there will be no integration with DHL or any of its units.
     Stay tuned.
(Patrick Burnson)