Mr. Michael Eskew, Chairman & CEO, UPS

Mike Eskew, Chairman and CEO of UPS, chose one of the most charming images from the bird world – geese flying in V formation – to illustrate what he thought should be the efficient pattern for Hong Kong in managing its economic relations with Mainland China.

Speaking at a lunch hosted by the Hong Kong General Chamber of Commerce in association with Aerospace Forum Asia, Eskew noted that the V formation was aerodynamically efficient, since no bird had to fight the turbulence created by its neighbour in front. Scientists also think the geese benefit from a slipstream effect from their neighbours.

“With Hong Kong riding on the slipstream of China’s flight, wouldn’t its relationship with China be as aerodynamically efficient as geese in a V formation?”

So it is with managing a streamlined supply chain: avoiding turbulence, leveraging velocity and gaining visibility, he said.

Eskew was in Hong Kong for more down-to-earth matters than to make elegant analogies between birds and business: he was marking UPS’s inaugural direct Hong Kong-Europe flight, a result of new route assignments awarded following negotiations between the United States and Hong Kong that Eskew described as long and hard. “Ultimately both the United States and Hong Kong governments recognized the need for more liberalised air services between these two important markets.” However, as one questioner at the lunch noted, many in Hong Kong – and elsewhere --believe the U.S. still has a long way to go to fully open up its own skies and supply chains to foreign operators.

Eskew was full of praise for Hong Kong as a “terrific place to do business” and as a gateway to China. But he added a cautionary note: “As industries move to China to take advantage of lower operating costs, Hong Kong’s economy must evolve to higher value-added sectors or risk being phased out.

“Tighter integration with China and within the Greater China region is therefore crucial. Closer cooperation promotes the freer flow of goods, information and funds.”

Coincidentally, within hours of Eskew’s speech, Cathay Pacific Airways announced its very own tighter integration with China, saying it intended to commence services to Beijing on December 2, beginning with three return services a week.

Eskew gave two graphic illustrations of the whirlwind speed of change both globally and within his own Atlanta-based company. Firstly, he said that in 1970, foreign exchange transactions worldwide totaled about US$10 billion a day. Today, $10 billion dollars’ worth of foreign exchange transactions occur every second.

At UPS, five years ago during the busy Christmas season, the company had 600,000 people call to ask if their packages had been delivered, and it cost UPS $2 to take each of those phone calls. Last year the 600,000 calls had soared up to 10 million. But they were all made on the Internet and the $2 cost was reduced to two cents, as people were able to track their packages themselves.

Just prior to Eskew’s Hong Kong visit, UPS’s rival FedEx Corp had been giving some details of its expansion plans in China, saying it would add 100 Chinese cities to its network over the next five years. When asked about UPS’s plans on the Mainland, Eskew was less specific but noted that the company’s growth in China had been “terrific”.

“We are very optimistic about our business in China.”

UPS’s Hong Kong-Europe flights, starting on October 28, fly from Hong Kong to UPS’s European air hub in Cologne via Bombay or Dubai.