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RR RUEHCN RUEHGH
DE RUEHGH #0221/01 1080552
ZNR UUUUU ZZH
R 180552Z APR 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5705
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
INFO RUEHBJ/AMEMBASSY BEIJING 0972
RUEHGZ/AMCONSUL GUANGZHOU 0537
RUEHCN/AMCONSUL CHENGDU 0556
RUEHSH/AMCONSUL SHENYANG 0562
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC 0129
RHEHAAA/NSC WASHINGTON DC
RUEHIN/AIT TAIPEI 0447
RUEHHK/AMCONSUL HONG KONG 0662
RUEHUL/AMEMBASSY SEOUL 0061
RUEHGP/AMEMBASSY SINGAPORE 0049
RUEHFT/AMCONSUL FRANKFURT 0004
RUEHKO/AMEMBASSY TOKYO 0114
RUEHGH/AMCONSUL SHANGHAI 6087

UNCLAS SECTION 01 OF 02 SHANGHAI 000221 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EEB AND E 
TRANSPORTATION FOR OFFICE OF THE SECRETARY, AND OST X-1, X-40 
TREASURY FOR AMB. HOLMER, WRIGHT, TSMITH, AND OASIA - DOHNER, 
HAARSAGER, CUSHMAN 
USDOC FOR ITA MAC DAS KASOFF, MELCHER, MCQUEEN 
NSC FOR TONG 
 
E.O. 12958: N/A 
TAGS: EAIR ELTN ECPS ETRD OVIP CH
SUBJECT: DOT SECRETARY PETERS ATTENDS UPS CARGO HUB OPENING IN 
SHANGHAI 
 
REF: SHANGHAI 220 
 
This cable is Sensitive But Unclassified (SBU) and for official 
use only.  Not for transmission outside USG channels. 
 
¶1.  (U) Summary. During her April 11-12 visit to Shanghai 
(reftel), Transportation Secretary Mary Peters attended a 
signing ceremony for the creation of the United Parcel Service 
(UPS) International Air Hub at the Shanghai Pudong International 
Airport (PVG), with an initial investment of USD 20 million. 
The UPS facility was the first cargo hub established under the 
2004 U.S.-China Air Transport Agreement.  With this agreement, 
UPS will benefit from increased flexibility in running its 
operations and Shanghai will continue its goal of positioning 
itself as a regional and international transportation center 
poised to meet the demands of the 2008 Olympics and 2010 
Shanghai World Expo.  End summary. 
 
-------------------- 
UPS Hub Announcement 
-------------------- 
 
¶2. (U) On April 12, Secretary Peters, joined by Shanghai Vice 
Mayor Yang Xiong, witnessed the signing of a contract by UPS 
Asia-Pacific President Ken Torok and Shanghai Airport Authority 
(SAA) Chairman Wu Nianzu to establish UPS's cargo hub at PVG. 
UPS is the first U.S. carrier to qualify for "cargo hub status" 
in China under provisions set forth in the U.S.-China Air 
Transport Agreement, amended by Protocol dated July 2004. 
According to UPS China Public Affairs Manager Liu Ran, under the 
bilateral agreement, cargo hub status will allow UPS much 
greater flexibility to manage its business, including unlimited 
frequencies and Seventh Freedom rights - the right to carry 
passengers or cargo between two foreign countries without 
continuing service to one's own country. 
 
¶3. (U) In her remarks, the Secretary noted that the hub 
agreement demonstrated the benefits of the 2004 Air Transport 
Agreement between the U.S. and China and was an important 
milestone to meeting increasing demands for bilateral air cargo 
services that reached almost 400,000 tons in 2006.  The 
Secretary said that UPS's new cargo hub status would bring 
 
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greater flexibility to UPS operations in China and give 
China-based businesses better access to major centers around the 
world, thus demonstrating the benefits of liberalization of air 
services to support the growing bilateral trade relationship. 
 
¶4. (U) Civil Aviation Administration of China (CAAC) East China 
Bureau Director General Xia Xinghui noted that the UPS cargo hub 
was an important step in assisting China in meeting its growing 
air cargo demands and consistent with China's goal of promoting 
Shanghai as an international and regional air services center. 
He said that UPS's agreement with SAA was China's second such 
cargo-hub agreement with a U.S. express service company; Federal 
Express had opened cargo hubs in Guangzhou and Hangzhou.  (Note: 
UPS's Liu Ran later clarified that UPS was the first U.S. 
airline to meet the criteria of the 2004 Air Agreement to 
qualify for cargo hub status, including having 72 movements per 
week.  While FedEx had expressed its intent to establish a hub 
in Guangzhou, it did not expect to qualify until 2009.  FedEx's 
"hub" in Hangzhou was actually a domestic hub of Chinese airline 
Okay Airline, with which FedEx had a commercial license.  End 
note.) 
 
¶5.  (U)  Xia added that China was now the world's second largest 
aviation market in terms of turnover, after the United States, 
although he acknowledged it was a distant second, accounting for 
about 12 percent of the market, compared to the 60 percent 
accounted for by the United States.  East China was now 
responsible for 32 percent of China's passenger traffic and 51 
percent of its cargo.  With more than 2.15 million tons handled 
 
SHANGHAI 00000221  002 OF 002 
 
 
in 2006, PVG was now the world's sixth busiest cargo airport. 
 
¶6. (U) Shanghai Vice Mayor Yang Xiong thanked CAAC for its 
support of the Shanghai Municipal Government's efforts to 
promote Shanghai as an international transportation center. Last 
year's rapid growth in air passenger led to 490,000 take-offs 
and landings with over 46.2 million passengers and 2.53 million 
tons of cargo delivered at Shanghai's PVG and Hongqiao airports. 
 He noted that the expansion at PVG would be completed by 
December and would boost its capacity to 60 million passengers 
and 4.2 million tons in cargo per year.  Yang said that other 
international freight and shipping companies should consider 
Shanghai as their regional cargo hub and that this type of 
international business benefited Chinese freight and shipping 
companies as well.  Yang pledged that Shanghai would "make full 
efforts" to insure the success of its regional air hub and to 
promote passenger and cargo growth. 
 
¶7. (U) UPS President for Asia-Pacific Ken Torok thanked SAA, 
CAAC, the Shanghai Municipal Government, DOT and the State 
Department on behalf of UPS's 400,000 employees worldwide.  He 
said that UPS had been doing business in China since 1988 and 
had invested USD 600 million to become China's first 
wholly-owned foreign express carrier.  UPS currently had 76 
total take-offs and landings per week at its Pudong facility and 
employed 200 people.  When its hub expansion project was 
completed in 2012, its Pudong workforce would grow to 1,000 
employees and be able to sort 17,000 pieces per hour.  UPS would 
move to 24/7 processing, expanding its fleet to incorporate more 
Boeing 747-400s in addition to its current fleet of mostly 
Boeing MD-11s.  At a later tour of the facility, Torok told the 
Secretary that UPS had a total of 4500 staff in China and 1,200 
 
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delivery vehicles.  The cargo hub facility would break ground in 
August 2007 and, it was hoped, be operational in time for the 
August 2008 Beijing Olympics.  The Shanghai Aviation 
Administration (SAA) would construct the facilities and lease 
them to UPS.  UPS's current facility was 5,000 square meters; 
its new hub would cover 96,000 square meters. 
 
¶8. (U) The DOT delegation cleared on this cable. 
JARRETT