Air Transport World

When niche means most. (Polar Air Cargo)(Company Profile)

When Polar Air Cargo was created in January, 1993, the plan was to have a small, 3-4-aircraft operation providing lift for freight forwarders serving the Pacific Rim. It would be a nice little niche carrier serving a nice little niche in the air-cargo industry.

That seems to be the airline's only mistake, so far.

In less than three years, the "nice little niche carrier" has grown to 12 747Fs, with two more to be added by the beginning of the peak season this fall, making it the largest all-747 operator in the world. Plans are to put at least six more aircraft into service by the end of next year. And that "nice little niche in the air cargo industry" is the largest segment of the international air-cargo arena, serving multinational freight forwarders who control over 80% of the world's cargo business.

The genesis of Polar Air Cargo actually dates back to 1989, when Federal Express bought out Flying Tigers. Since FedEx acquired Tigers' for its route network, rather than to get into the freight wholesale business, it subsequently sold off the 747s it had obtained in order to introduce its special type of high-frequency service.

And while the FedEx service did provide some capacity to the freight forwarders, using space that was not needed for its own door-to-door service, that capacity is declining continually as FedEx's core business expands.

"One of the problems that stemmed from FedEx's acquisition was that Tigers was the backbone cargo wholesaler in the transpacific market. So what emerged was a market gap of low-cost, unbundled airport-to-airport line haul capacity," said Brian Clancy, a principal with MergeGlobal Inc., an Arlington, Va.-based air cargo analysis group.

"Ironically, over time, because of the boost in frequency, the net amount of capacity will actually go up. The key issue is that net amount of wholesale capacity offered to freight forwarders will decline as FedEx's organic traffic grows," he said.

To fill that gap, Edwin H. (Ned) Wallace and Mark West, both former employees of Flying Tigers, developed a business model designed to provide wholesale transportation directly to multinational freight forwarders.

Both Wallace and West are highly experienced in the Asian cargo market. Wallace, now Polar's CEO, had served more than 20 years in Asia with Tigers, ending up as senior VP-international sales & services. …

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