Polar's VP for Asia Pacific
Polar Air Cargo Worldwide, Inc. has executed a letter of intent for DHL to acquire a 49% equity interest, including a 25% voting interest in the scheduled-service business of Polar Air Cargo, Inc (Polar) for US$150 million in cash.
According to DHL, the partnership will significantly improve service to DHL Express customers shipping goods between the US and Asia by securing long-term access to greater air capacity on the transpacific air routes, reducing transit times and increasing reliability of delivery on both sides of the Pacific.
"There is a 20-year block space agreement for DHL Express with early termination rights that guarantees DHL solutions on the USA-Asia points," acknowledges Kersti Krepp, Polar's VP for Asia Pacific.
For Polar and its mother company, Atlas Air Worldwide Holdings, Inc (AAWW), it will provide a valuable, long-term partnership and potential revenue stream in excess US$3.5 billion over the full-term of the agreement. DHL will also have the added access to available additional aircraft capacity from AAWW's subsidiary, Atlas Air, Inc (Atlas).
"This key strategic partnership ensures we can meet the rapidly rising demand for air cargo capacities between the US and Asian destinations. DHL Express is already the market leader in Asia and the partnership with Polar will help us offer even higher quality levels to customers, while at the same time improving profitability on the fast-growing routes between the US and Asia," said John Mullen, CEO of DHL's Express division. "The trans-Pacific route is one of the most rapidly growing and competitive trade lanes globally and adding capacity through an even stronger presence in the US is a crucial factor in supporting our dynamic Asia business. Polar is the ideal partner in to achieve that. Our long-term partnership will benefit both companies and enhance competition in the express delivery sector of the air cargo market."
DHL said the letter of intent that both parties signed stipulates that DHL will invest US150 million to acquire the minority stake of 49% in Polar, including a 25% voting interest, consistent with US laws and regulations. The payment will be in cash US$75 ,million to be paid upon closing of the transaction, and US$75 million to be paid in two installments on 15 Jan 2008 and 17 Nov 2008, subject to certain acceleration provisions.
Polar will continue to operate as an independent company and there will be no integration with DHL or any of its units. DHL operates in all major American and Asian markets, with a wide range of mail, express, logistics and air and sea freight products.
According to Polar, under the terms of the 20-year commercial agreement, DHL would have access to lift capacity through Polar's current fleet of six Boeing 747-400 Freighters, plus additional available ACMI aircraft from Atlas. Through its subsidiaries, Atlas and Polar, AAWW operates a fleet of 35 Boeing 747 freighters. Polar provides scheduled air cargo services to the world's largest international freight forwarders, operating airport-to-airport routes on a specific schedule serving Asia, Europe, North America and South America. Atlas offers commercial cargo charters, military cargo charters and ACMI freighter aircraft leasing in which customers receive a dedicated aircraft, crew, maintenance and insurance on a long-term lease basis.
Certainly, the attractiveness of Polar to DHL is due strongly to the China frequencies it has received from the US Dept of Transportation, which recently awarded Polar four additional weekly frequencies for US-China beginning 25 March 2007. This would increase Polar's weekly China flights to 16.
Today, Polar has 12 weekly frequencies between the US and Shanghai and with authority to operate the additional four weekly frequencies in March. Polar started its all-cargo scheduled service to China in Dec 2004 with six weekly flights. Three additional flights were added in March 2005, and another three in March 2006. The carrier is one of only four US freighter operators designed to serve China.
"We tailor our network to suit our customers' needs," says Krepp. On 11 November 2006, Polar begun two weekly scheduled-service operations into Beijing Capital International Airport (PEK). "The flights go over Korea to the US and onto South America."
Polar flights started in Hong Kong 12 years ago. "We are certainly dedicated to this market. Polar serves China through our operations in Hong Kong and Shanghai," says Krupp, "Shanghai serves central China while Beijing serves northern China."
By Gina Giron-Urquiola