The Chinese government's increased spending commitment on infra-structure to stimulate economic growth has been a boost to the aviation industry at a time when carriers have been seriously impacted by the Asian crisis. There are currently in hand 40 airport construction, extension or renovation projects.
Air cargo levels have been expanding since the start of the open-door policy but growth has been inhibited by a lack of resources. In the late 1980s/early 1990s a spate of accidents persuaded aviation officials to focus more on safety than absolute growth. The industry realised that it takes time to train staff and to get airports and cargo terminals in place.
Substantial growth
The Civil Aviation Administration of China (CAAC) has budgeted US$8bn during the current five-year plan for the upgrade and expansion of the nation's airports. At pre-sent CAAC envisages 176 airports by 2010, although even this may fall short of demand. Targeting 10 percent annual growth over the next 20 years, China expects the air cargo business to grow with just as much vigour as that of its passenger traffic.
It remains to be seen whether China can achieve this growth rate given the onset of the Asian crisis or whether it will have to scale down some of its projects to avoid serious over-capacity. The International Air Transport Association (IATA) has down-graded its previous estimate of air traffic growth in Asia until 2010. Just over a year ago it forecast annual growth at 7.7 percent but now it expects an average nearer 4.4 percent over the same period.
Nevertheless, even taking into consideration the relatively low base from which it began, many parts of China have recorded substantial growth in air freight, justifying the expansion of its cargo facilities.
Relatively few foreign carriers operate dedicated cargo flights to China, with most preferring to operate a mix of passenger and cargo services. However there are instances of specific investment in cargo. Air France, for example, plans to build an air cargo terminal at the Shanghai Hongqiao Airport from where it operates a weekly Boeing 747-200F cargo service from Paris. It is currently in discussions to double the frequency. This is in addition to the cargo capacity provided by thrice-weekly passenger services operated by Airbus A340 aircraft.
Luxembourg-based Cargolux Airlines plans to start a weekly B747-400 freighter service between Luxembourg and Shanghai in March 1999. The airline believes the Chinese market promises steady growth and that Shanghai is the focus for new freighter services. Lufthansa Cargo started its weekly Frankfurt-to-Shanghai freighter service using an 85-tonne capacity MD-11F on the route. Starting March 29, KLM will start operating a twice-weekly service between Amsterdam and Shanghai. The Dutch national carrier will use a Boeing 747-400 Combi, which offers considerably more than just the belly cargo capacity of a standard 747.
Among Chinese carriers, China Eastern Airlines is one of several to be expanding their air cargo networks and was due to launch in January a service from Shanghai to Paris via Beijing.
The Shanghai-based airline already operates a twice-weekly passenger service to the French capital and in order to help the development of its freight operations, it formed China Cargo in August last year. China Cargo, in which China Eastern holds a 70 percent stake, is a joint venture with shipping giant Cosco. While China Eastern will pro-vide China Cargo with dedicated MD-11 freighters, Cosco will make available its own cargo sources available through its world-wide shipping network.
Initially, the new airline will operate from Hongqiao Airport with DC- l 0-30Fs wet-leased (involving the supply of crew as well as aircraft) from Gemini Air Cargo. How-ever when Pudong International opens next year to serve Shanghai, it will expand its business to the new airport.
An integrated service
Pudong is being developed by Aeroport de Paris (ADP) but with a 500,000-tonne cargo facility it cannot match the traffic throughput of Chep Lap Kok in Hong Kong. Nevertheless, the new airport could be further developed to outstrip Beijing's cargo capacity. When Chep Lap Kok airport opened last year, its cargo terminal was in such chaos that the old terminal at Kai Tak had to be put back into service.
However, the new Hong Kong Air Cargo Terminals Limited (HACTL) facility at Chep Lap Kok has a 2.6m tonnes capacity and its major problems are now behind it. Despite a six percent decline in air cargo throughput in 1999 compared with 1997, the new airport's authority favours competition and HACTL has a rival in the form of Asia Airfreight Terminal Company Limited (AAT). A joint venture partnership that brings together Singapore Airlines, Changi International Airport, Federal Express, China Merchant Shipping and Keppel Telecommunications, AAT has been developed by a German project team in co-operation with Lufthansa Consulting. The new facility has a 420,000-tonnes annual capacity.
Chep Lap Kok is facing competition from the growing number of airports in southern China. Shenzhen, for example, is reported to have handled 6,590 tonnes of cargo in 1998 a 60 percent increase over the previous year. Its total of 336 cargo flight arrivals and departures was up 40 percent. Shenzhen's throughput may be small compared with the nearly 2m tonnes achieved by Hong Kong, but the latter grew by ‘only' 14 percent in 1997 (the last published figures). Since it opened in 1991, Shenzhen has grown to become China's fifth busiest airport.
The link between air and sea transport is not unusual in Asia – Korean Air, for example, is developing an integrated air-sea-land service in cooperation with its parent Hanjin Transportation. Korean Air offers a multi-modal cargo service that provides one-stop service links with Chinese cities such as Shanghai, Tianjin, Qingdao, Dalian and Weihai to any place in the world, through Seoul Kimpo airport and the seaports of Pusan and Inchon in South Korea.
With dedicated trucking services between airport and seaports, Korean Air provides a seamless transport service with a guaranteed same-day connection. Since its introduction in 1991, the sea and air service has reduced average transit time to and from China to less than five days. It is a measure of the resilience of China's economy that Korea Air Cargo's Seoul-to-Shanghai service was expected to achieve an 85 percent load factor by the end of 1998.
As well as planning to increase frequency on this route, Korean Air plans to start a freighter service to Tianjin because there is insufficient space available at nearby Beijing Airport. Even so, Beijing handles about 18 percent of China's cargo and the airport's master-plan projects one million tonnes by 2005.
Expanding capacity
Last July CAAC revealed plans to allow domestic airlines to open air cargo routes, seeing this to be a means of preparing China for greater demand when the Asian economies recover. Under the new plan, air-lines will be able to apply for licences to operate specialist air cargo routes, rather than only carry freight in the holds of passenger aircraft.
To enable airlines to achieve this objective, they will be permitted to import cargo aircraft or convert some passenger airliners to freighter roles. By expanding domestic cargo routes and increasing handling capacity, Chinese airlines and cargo forwarders will be able to overcome some of the problems resulting from a substantial drop in air cargo for exports.
It has not been revealed just how much of the market will be opened to foreign companies but at present some 46 foreign airlines and express companies hold licences for inbound and outbound flights, controlling more than 15 percent of the air cargo market.
Encouraged by the new CAAC policy, Guangzhou-based China Southern Air-lines has announced its intention to acquire a wide-bodied freighter. The carrier had previously used a Martinair Holland MD-11F to transport freight into Europe but the Dutch carrier discontinued its services into Guangzhou last November. It had been carrying high load factors westbound but insufficient on the return. Noting that Air China operates two freighters and China Eastern has one, China Southern is conscious of the fact that it is the only one of the big three airlines to lack cargo aircraft. Indeed, there are only about 11 cargo aircraft in the whole of China and most of these are used on domestic routes.
Emery Worldwide, the large US-based cargo transportation company, has formed a joint venture with China ElecTrans International, a subsidiary of the state-owned China National Electronics Import and Export Corporation. Established last October, the new company will provide freight forwarding and logistics services throughout China.
It has been awarded an ‘A' licence by the Ministry of Foreign Trade and Economic Co-operation, enabling the locally registered Emery Worldwide International Transportation Company to engage in air freight, sea freight, customs clearance, warehousing, consolidation/deconsolidation and other related activities. Emery has had a presence in China since 1983 but there are no plans at present to operate its own aircraft into the country.
The Air Foyle/Antonov operation is at the high end of the capacity scale, in that it is dedicated to the carriage of outsize cargo. For this the UK/Ukrainian airline uses the giant Antonov An-124 freighter which began operating to and from China in 1993. Since then the airline has targeted China as a major growth area and has enjoyed a dramatic rise in demand for its freighter services.
Specialised services
China has formed an array of joint ventures with Western companies, many of which present a demand for specialised air cargo services. From satellite units to automotive assembly line equipment and electro-power generation equipment, the An-124 freighters are contributing to China's overall economic development.
Air Foyle reports that there was not much outsize cargo business into China last year. Marketing director George Short suggests that, as an economy measure, surface trans-port has been used instead. However he also notes that an increasing number of carriers are putting Boeing 747s on services to China, thus increasing cargo capacity.
Antonov freighters also assisted in the construction of Lukou Airport, which opened at Nanjing in Jiangsu province last July. A thrice weekly air cargo service opened in November, linking Lukou with Winnipeg, operated by Kelowna, a Canadian air cargo operator. Usage forecasts for Lukou envisage a through-put of 120,000 tonnes by 2005, while passenger and freight services to Japan, the Netherlands, Korea, Russia and Malaysia are planned.
