The director general of the General Administration of Civil Aviation of China, Yang Yuanyuan, told a summit of the International Air Cargo Association (TIACA) in Beijing that air cargo would be prioritized in an active, gradual and orderly opening of the sector to foreign competition. No specific timeframe was provided.
The initiative will build on increasing freedoms already enjoyed by many foreign firms as a result of partial liberalization of the sector. With rules already allowing 49% foreign ownership of domestic companies, some of the world's largest freight carriers have announced significant investments in China's lesser-known aviation names. China has also signed bilateral air cargo transportation agreements with 42 countries over the past five years, and has launched a series of trial projects for overseas firms to join in air cargo transportation in coastal cities.
Fifth-freedom rights for air cargo also exist in selected second- and third-tier ports like Haikou, Nanjing, Xiamen, enabling airlines to unload, load and then leave directly for another place without first having to return to its country of origin. Further, US air transport companies are already able to set up cargo transport hubs in China, following the signing of an agreement in July 2004 between the two countries on air cargo delivery.
There is room for further opening up in the far-from-saturated sector. CAAC has expects air cargo volume growth will exceed gross domestic product growth by a quarter, expanding at 12% over the next five years after an average of 13.6% annual growth since 2001. In comparison, US air giant Boeing has projected 6.2% global growth over the next 20 years.
With Chinese airlines extending themselves just to keep up with galloping passenger demand, currently growing close to 9% every year, China's future growth demands, and could depend, on Beijing easing the way for new entrants in cargo sector. Yang's announcement is a step in the right direction.
Home listing for Air China
Air China is eying a mainland listing in Shanghai to finance 20 new Airbus A330 aircraft, 15 Boeing B787s and 10 Boeing 737s. The flagship carrier said shareholders had approved a plan to offer up to US$2.7 billion in stocks and the Chinese regulators are also in support, although no date had been set due to the continued suspension of domestic listings. The airline plans to launch flights to New Delhi and Mumbai in October to meet rising demand for direct links with India. The Beijing-based carrier flew 2.45 million passengers in March, up from 2.15 million passengers in February.
China Eastern seeks investor
China Eastern Airlines is in talks with three or four groups with a view to selecting an investor to take a minimum 20% stake in the company and help boost management operations. Company chairman Li Fenghua refused to say who was involved in the talks, but it was thought Singapore Airlines was among them. The airline, one of the three major state-run carriers alongside Air China and China Southern, recorded a net loss of US$58.4 million last year following profits of US$40 million in 2004. It blamed rising competition and high fuel prices for the decline.
New Boeing order in pipeline
Boeing announced it had reached a preliminary agreement with China over the sale of 80 narrow-body 737 airplanes. The deal, worth a total of US$4.6 billion at list prices but likely to involve a sizeable bulk-buy discount, is expected to be finalized with individual Chinese airlines over the next few weeks. The order comes in addition to 70 planes China said it would buy from the US manufacturer in November. In December, it said it would purchase 150 Airbus SAS jets in a deal worth more than US$9 billion at list prices.
New air corridor opened
After six years of talks, China agreed to open a new corridor through its tightly restricted air space. This could save airlines US$30 million in annual fuel costs and trim an average of half an hour off flight times between China and Europe. China's air space, which is controlled by the military, is among the world's most restricted, with only 30% open to civil aviation. The new route is the first of several steps the International Air Transport Association wants Chinese authorities to take to prevent delays on flights to and from the biggest cities. In the past, carriers have had to follow rigid and often meandering routes, including doglegs and 90-degree turns.
Passengers cover fuel hike
China raised aviation fuel prices 6% to US$37.37 per tonne as part of a package to help state refiners recover losses. The jet fuel pricing scheme has also been revised to allow prices to float more freely from April 1. The new system will allow domestic airlines and distributors to negotiate selling prices within an 8% band of an outright price that includes a set margin for distributors. To help already struggling airlines cope, fuel surcharges for domestic flights went up from April 10. Passengers flying less than 800 kilometers will now pay US$3.75, up from US$2.50, while those flying further need to pay a US$7.50 surcharge, up from US$5.
US models fuel efficiency
China could greatly improve its airlines' fuel efficiency by introducing more flexible air traffic management, the deputy administrator of the US Federal Aviation Administration said. Robert Sturgell, in China to meet with aviation officials, said greater flexibility between civil and military airspace has saved US airlines millions of dollars in fuel bills. He also pointed to the benefits of satellite navigation systems that allowed for more direct routes and an air traffic management system that permitted more high-altitude flights. The US Department of Transportation plans to cut fuel consumption by 1% a year through to 2009, which would save airlines around US$2 billion in annual fuel costs, he said.