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FedEx to Open $150M Facility in China

Associated Press
Published | Updated

HONG KONG – In a move to exploit China's fast-growing market, FedEx Corp. (FDX) said Wednesday it will close its Asian hub in the Philippines (search) and replace it with a new $150 million facility in Guangzhou, southern China.

The new cargo-handling center at Guangzhou's Baiyun International Airport, scheduled to open in December 2008, will better serve clients doing business in China, the company said in a statement.

Memphis, Tenn.-based FedEx predicts that air freight from China to the United States will grow an average of 9.6 percent a year over the next 20 years.

The Subic Bay (search) facility, located at a former U.S. naval base, will close by the end of 2008, by which time the Guangzhou operation will be in service, according to FedEx, the world's largest cargo airline.

"We do not need two Asia-Pacific hubs," FedEx Chief Executive Frederick Smith (search) said at a news conference in Guangzhou. "As markets change, growth patterns change. You have to go where your customers go."

Smith said the runway at Subic Bay cannot be expanded and cannot accommodate new cargo jets. Last year, FedEx had extended its Subic Bay lease to 2010.

The Philippine government transformed Subic Bay, a deep water port 50 miles west of Manila, into an economic and tourism zone after its lease to the United States expired in 1992.

Sen. Richard Gordon, who negotiated the establishment of the hub in 1995 as the first head of the Subic Bay Metropolitan Authority, said he was saddened by FedEx's decision.

"Personally, I am devastated," he said. "I wanted them to be very happy in Subic."

It wasn't immediately clear how many jobs will be eliminated. But workers laid off in Subic Bay will receive career counseling, and those who can't find jobs elsewhere will receive a severance package that exceeds what is required by Philippine law, FedEx Asia Pacific President David Cunningham Jr. said in a statement.

The 155-acre Guangzhou facility will have floor space of 882,000 square feet and be able to handle 24,000 packages an hour, the company said. It will hire 1,200 people initially.