DHL is forming a strategic partnership with Polar Air Cargo Worldwide, Inc., a wholly owned unit of Atlas Air Worldwide Holdings, Inc. 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 Trans-Pacific air routes, reducing transit times and increasing reliability of delivery on both sides of the Pacific. The commercial agreement will run for up to 20 years and will provide DHL Express guaranteed access to aircraft capacity in key global markets. In addition, DHL will have access to additional available aircraft capacity from Atlas Air, Inc., another subsidiary of AAWW, as agreed between the parties. The long-term partnership will provide Polar a long-term committed revenue stream, and strengthen the company’s position as a reliable source of main deck freight capacity. With this strengthening, Polar’s existing customers will be assured continued access to reliable, high quality service levels.
‘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 Asian business. Polar is the ideal partner to achieve that. Our long-term partnership will benefit both companies and enhance competition in the express delivery sector of the air cargo market.’
To cement the relationship, the parties have signed a letter of intent under which DHL will invest $150 million (119 million euros) to acquire a minority 49% equity stake in Polar, including a 25% voting interest, consistent with all US laws and regulations.
In addition, DHL will enter into a 20-year block space agreement with Polar to obtain guaranteed capacity on routes to major Asian destinations. The transaction, subject to regulatory approvals and completion of definitive documentation, is expected to close in late 2006 or early 2007. Polar will continue to operate as an independent company and there will be no integration with DHL or any of its units.
William J. Flynn, President and CEO of AAWW, said, ‘This is a landmark partnership for our Company. Our strategy has been to maximize the value and potential of our scheduled-service business, and this transaction accomplishes that goal. DHL is a pre-eminent express service provider and the world’s largest buyer of third-party airlift capacity. Their investment and the long-term commercial agreement will markedly strengthen our scheduled-service business, and will enhance our ability to provide customers with superior service in key international markets. Further, it provides our Company with a significant increase in our cash liquidity and a very attractive long-term revenue stream. Indeed, this transaction reinforces our leadership position as an outsource provider of air cargo services, and greatly enhances the value of our Company.’