China is likely to become a major battlefield for cargo plane makers in the next 20 years as the country’s air cargo sector maintains a more than 10%.

China Aviation Industry Corporation I (AVIC I) — one of the country’s leading aircraft manufacturers — said China would need 568 freight carriers by 2026, more than 10 times the size of the present fleet, as its air cargo industry continues to boom.

An AVIC 1 report says that by the end of last year, Chinese airlines were operating 46 freighters with a commercial payload of 2,300 tons,.

Liao Quanwang, vice-president of Aviation Industry Development Research Center of China, which is affiliated to AVIC I, said, ‘China’s air cargo market will maintain an annual growth rate of 10.5% in the next two decades, which is slightly higher than the growth rate of the passenger transport market.’

He said the fast growth is being fueled by China’s booming foreign trade, which provides abundant cargo to air carriers.

Boeing has said China’s air cargo market will continue to lead the world in the next two decades during which its fleet of cargo planes will more than quadruple in size.
Source: China Daily

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

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

The Shenzhen-based Jade Air Cargo will fly to the United States upon delivery of its fourth B747-400ER freighter.

Reto Hunziker, vice-president of sales and marketing, said, ‘We will fly to Houston in June.’ He said that initially it will be twice a week, but the frequency will probably be increased to three.

The service is routed over Vancouver. On the eastbound sector, the Canadian city will be chiefly a fuel stop, but in the westbound direction Hunziker hopes to pick up seafood destined for Asian markets there.

Reto Hunziker said, ‘We were thinking of flying perhaps over Portland, but we can only fly city pairs that are not already served by another Chinese carrier.’ Air China has freighter service to Portland.

In recent months, a number of carrier executives have warned that capacity out of China has grown faster than demand for cargo, producing a glut and downward pressure on yields.
Source: Cargonews Asia