Cargo Air France-KLM is in talks to team up with China Southern Airlines in setting up an international cargo airline in China. It is following in the footsteps of Lufthansa.

Lufthansa Cargo holds a 25% stake in Jade Cargo International, which started operations last month.

Air France-KLM is (since the airlines amalgamated Air France-KLM can be regarded as one airline) eager to play a role in the China air cargo market.

To give a guide to what is possible: Jade Cargo was founded in October 2004 as a joint venture between Shenzhen Airlines (51%), Lufthansa Cargo (25%) and the German development finance institute DEG-Deutsche (24%). The company’s headquarter is in Shenzhen. Jade Cargo International currently serves the following destinations from its hub in Shenzhen:

Amsterdam; Seoul-Incheon; Brescia, Italy; Barcelona, Spain; Osaka; Luxembourg (which is, in itself, a cargo hub for much of Europe); Shanghai-Pudong; Leipzig-Halle, Germany; Stockholm, Sweden; Frankfurt, Germany; Vancouver, Canada; Houston, USA.

That is a long list (note there is no destination in France or the UK) and shows, very clearly, the potential of the market. It is also enough to make the cargo management of Air France-KLM very nervous.
Source: Luchtak Aviation

Hong Kong-based Dragonair, which is associated with Cathay Pacific and was originally established in May 1985, plans to expand to a number of major destinations throughout China.

Kenny Tang , chief executive officer of Dragonair, said as part of an effort by the airline to strengthen its network, the company will soon begin offering travel services to several extra top Chinese destinations.

He said, ‘We are pleased to bring more flexibility and convenience for mainland travelers. The addition of these extra services gives travelers more options, while we can help attract more mainland tourists to visit Hong Kong and boost the economy.’

The airline fully joined the Cathay Pacific Group last September although Cathay had an involvement for some years before that. In 2006 tourism in Hong Kong increased 8.4% as more than 13.5 million travelers arrived from mainland China.
Source: UPI

Under the 2004 bilateral agreement China opened its air hubs and major coastal cities to US airlines. From this year, under a new, more extended bilateral agreement it will open its central hinterland (effectively all of China) to US carriers.

As a result Chinese airlines will feel the heat of competition. US carriers can now fly to provinces such as Anhui, Hunan, Hubei, Jiangxi and Shanxi.

According to Li Lei, an airline analyst with Zongxin Investment the new deal will open up all provincial capitals to US carriers. Restrictions on air cargo flights between the two countries will be lifted by 2011. This means, notes Li Lei, ‘potential cargo routes reserved for Chinese operators will be taken away by powerful US cargo airlines.’ The use of that word ‘powerful’ suggests that Li Lei may not be totally without bias.

Under the deal, US carriers will be able to operate 23 daily round-trip flights by 2012, up from 10 currently. China will have the right to fly the same number of flights to the US.

US carriers are eager to expand their flights after using up their quotas under the 2004 deal while Chinese carriers have still not utilised more than half the flights permitted. The reason is simple. To make a quid out of the airline business you need two way traffic. Passengers and cargo there, passengers and cargo back. Flying empty planes is a way to lose serious money.

From China to the US it is not a major problem getting a full load. The other way around is seriously difficult. US passengers, by and large, tend to book on US airlines.

According to the Civil Aviation Association of China the new deal offers an additional 13 flights for both sides, but as the Chinese side has no capability to use these flights, only the US operators will benefit.

This is true. Which means the Chinese operators are going to have to rethink the way they operate. To survive costs have to be cut, service improved, loads made more profitable. This is not easy, as airlines all over the world have discovered.

Tian Baoping, chief of the China Civil Aviation Management Institute, said Chinese operators need to work harder for self-preservation, which could be achieved faster by joining aviation alliances. He said, ‘Only internationalisation can uplift local airlines and airports and strengthen the civil aviation chain.’

China carriers have already started making moves to join alliances. China Southern is expected to become a member of the SkyTeam alliance by November; Shanghai Airlines may join the Star alliance by year-end; Air China has also expressed its interest in joining the Star alliance; and China Eastern Airlines is preparing for accession to the Oneworld alliance.

Membership in the alliances can help fill Chinese passenger and cargo aircraft as well as cut costs because of discounts achieved through the joint purchase of fuel, parts and freighters by the alliance members.

Another method of boosting international flights for Chinese carriers is to invite foreign operators to form joint ventures such as the Lufthansa-Shenzhen Airlines joint venture of Jade Cargo. China Southern is currently in talks with Air France-KLM on a joint cargo venture, while China Eastern is close to clinching a deal to sell a 25% stake to Singapore Airlines.

The airline business is tough and is about to get tougher. There will undoubtedly be casualties.
Source: CargoNews

A long and extremely well written article in The Economist —its articles are the best-edited in the world — concerns the future of aviation in Asia with special attention been give to China. What follows is the gist of part of the article regarding China. It is well worth looking up the full article using the URL at the end.

According to Naverus, the Seattle-based firm that installed the Required Navigation Performance (RNP) system at Linzhi in Lhasa conventional ground-based aids do allow precise enough navigation to the airport, which sits 9,670 feet above sea level. So it combines the avionics in a modern jet airliner with GPS to guide pilots along a narrow path to the airport. (Note that Aviation Week has the most excellent article on doing a landing using this system. It gives you some idea of the problems involved. If you know anything about flying this article is a serious ‘must-read.’)

China is planning to install scores of such systems, not just where landings and take-offs are difficult but also at congested airports. Already China has announced that from November the vertical spacing between aircraft will follow world standards which effectively doubles the air space in China.

Travelers in China are already getting fed up with airport queues and flight delays and these moves will help eliminate them.

In China last year airline passengers took 179m trips in China (135m on domestic services and 44m on international ones). The government says the numbers are increasing by around 15% a year, with a huge boost expected next year because of the Beijing Olympic Games. By 2010 they are likely to reach 270m — though that will still be only a third of America’s total last year.

China’s Civil Aviation Administration says it will spend more than RMB140 billion ($17 billion) in the next three years on building more than 42 new airports and upgrading others. China will still end up with only around 200 commercial airports, compared with some 20,000 (including many small ones) in America, which has barely one-quarter of China’s population. The potential for China’s aviation market is huge.

China leads the world in the introduction of electronic ticketing, which offers huge savings. Last year 95% of tickets issued in the country were electronic, up from 10% in 2005.

China is also investing heavily in new aircraft. Officials say that mainland carriers plan to double the size of their fleets to a total of more than 1,500 aircraft by 2010, reaching 4,000 aircraft by 2025. China already builds some small regional airliners and has announced plans to challenge Boeing and Airbus in the market for big jets by 2020.
Source: The Economist

China Southern Airlines is the biggest airline in China and now doing very nicely as are all the others. This year they may all expect a 16% increase in number of passengers carried because of economic growth and rising inbound tourism.

The General Administration of Civil Aviation of China said in a statement on its web site that China’s airlines may carry 185 million passengers in 2007. The number of passengers rose 16% to 160 million a year earlier.

Passengers are likely to take a total of 1.5 billion domestic flights in China in 2007, 8% more than a year earlier. This is a reflection of the country’s economic growth which makes leisure and business trips affordable to more people.

Cargo traffic was expected to reach 3.9 million tons, up 12% year on year, as exports and imports expand to $2 trillion. The administration said it would revise current plans for price reforms and launch new rules of charging at local airports this year.
Source: TD Trade and Shanghai Daily