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CHINA GIVES TOP PRIORITY TO CARGO TRAFFIC GROWTH
 [Raymond DuanBeijing]

China will take a phase-by-phase approach to opening its aviation market further in the next few years, with top priority being given to air freight, government officials said at a recent air cargo summit in Beijing.

The minimum aircraft requirement for air cargo operators may be reduced to just one freighter and carriers with foreign investment would be allowed to apply for international flights.

Liu Shaocheng, policy department director of the Civil Aviation Authority of China (CAAC), said China would set a ceiling for cargo rates as well as encourage airports to lower freight charges.

"Both foreign and private airlines, in particular all- cargo carriers, will be encouraged to boost freight transport,'' said Liu.


Great Wall Airlines, based at Shanghai's Pudong airport, was the first foreign and domestic venture to take off with its launch on June 22. Great Wall Airlines is a joint venture between China Great Wall Industry Corporation, Singapore Airlines Cargo and Dahlia Investments, a wholly owned subsidiary of Singapore's Temasek Holdings. A joint venture between Shenzhen airport, Lufthansa Cargo and a German investment company, is expected to be launched next month. Several more ventures are in the pipeline.

"Priority will be given to the opening of the international air cargo transport market," Liu stressed. Air cargo operators will be encouraged to strengthen their service network, distribution centres, information systems, fleets and ground facilities.


Sha Hongjiang, deputy director of the planning development and financial department of the general administration of CAAC, told the summit China would upgrade its airlines and airports and open its skies to more foreign airlines, particularly all-cargo carriers.

Foreign carriers already account for majority of China's international cargo traffic. In 2005, foreign carriers, including Hong Kong and Macau operators, accounted for 76 percent of China's international cargo volume.

Zhang Zhifeng, cargo president of China Southern Airlines and general manager of Guangzhou Air Cargo Terminals, was optimistic of growth in international air cargo, estimating it to rise by 14 percent annually by 2010, but expressed concern about the number of carriers entering the international air cargo arena. "It will definitely arouse drastic competition and further thin profit margins,'' he said.

Clients may become more choosy and prefer "delivered as promised" operators instead of "flown as booked" ones, while shippers may increasingly outsource consignments to third or fourth party logistic providers, he warned.


Zhang said China Southern will expand its freighter fleet and enrich its cargo products on international routes. "China Southern will join the Skyteam Alliance to strengthen co-operation with foreign airlines," he added.

Wang Boxue, deputy institute director of the Aviation Industry Development Research Centre of China, told the summit that a shortage of freighters was forcing mainland carriers to rely too much on bellyhold cargo carried on passenger flights and limited China's air cargo growth. Freighters only handle 26 percent of total cargo and mail in the country, he said.

"There is an urgent need for exclusive air cargo carriers, including those that carry oversized or heavy products," Wang said.