The United States recently lifted decades-long restrictions on trade with Cuba. FedEx now plans to open air cargo services to and from the country to expand its global distribution reach. FedEx is the first American air cargo company to submit such an application to the United States Department of Transportation (DOT). Take a look at how FedEx plans to establish a competitive advantage over UPS and other air cargo carriers that could also provide services to Cuba in the future.
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Situation: FedEx Plans Daily Air Cargo Route to Matanzas
Immediately after the U.S. reestablished trade with Cuba, several airlines raced to get permission for passenger routes to and from the country. Twenty slots were approved, but FedEx was the only airline to secure air cargo space. FedEx’s jumpstart puts the company in a good position to pick up market share for air cargo needs.
After getting approval from the DOT, FedEx announced a plan to operate small cargo planes five days per week from Miami, Florida, to Matanzas, Cuba. FedEx also plans to provide trucking services from the Matanzas airport to Havana and to the areas in between. The air cargo service is scheduled to begin on January 15, 2017, which gives FedEx time to analyze possible setbacks.
Approach: FedEx Chooses a Small Air Cargo Plane
FedEx originally planned to use large Boeing 757 aircraft and fly into larger airports in Cuba. However, the company has since decided to downsize its endeavor, at least in the beginning. FedEx has chosen to use a fleet of Cessna 208 aircraft. This plane has a single turbo engine and is much smaller than the Boeing 757 that FedEx typically uses for air cargo.
The company will fly in and out of an airport in Veradero, which is a resort town in the Matanzas. The Matanzas airport doesn’t currently receive much air cargo traffic and isn’t equipped to handle large Boeing 757 aircraft. In addition, the Matanzas airport is closer to Miami than the Havana airport is.
Impact and Advantage
Since FedEx was the first air cargo carrier to establish freight service to Cuba, the company has a competitive advantage. FedEx plans to establish relationships with companies in Cuba that need freight services before competitors have a chance. FedEx aims to provide all air cargo services in and out of Cuba.
The Wall Street Journal reported, “UPS continues to assess the opportunity to provide services to and from Cuba. As trade lanes open and demand for delivery services increases, UPS will take appropriate action to meet the needs of our global customers.
Only time will tell if FedEx’s strategy to enter Cuba early is a smart move. It makes sense from an investment standpoint because companies in the United States will need a way to transport goods to Cuba, and companies in Cuba have the same needs. This should prove to be a win for FedEx.[/show_to]
