Despite doom, gloom and downturn elsewhere in the industry, Asian cargo airlines have been reporting strong growth and are dusting off plans for expansion

Just over a year ago, major Asian airlines with substantial cargo operations were suffering badly. A downturn had begun early in 2001, largely on the back of a sharp drop in US demand for IT-related exports from the region.

But a year passes quickly in the industry. Since late last year, despite the global downturn that followed the 11 September terrorist attacks in the USA, Asian airlines have been reporting strong growth in their cargo operations. As a result expansion plans that many believed would be kept on hold for several years are being revived with a vengeance.

In China, Hong Kong, Taiwan, Japan and elsewhere, airlines are expanding their dedicated freighter fleets. Analysts say the expansion is generally justified, and that airlines are at the same time doing the right things in terms of broadening their focus.

In Hong Kong, for example, Cathay Pacific Airways is planning to expand its freighter fleet with its first "regional" cargo aircraft. The Airbus A300-600 is seen as most likely, with the fleet expected to be in service late next year, operated by all-cargo subsidiary Air Hong Kong through a partnership with express freight company DHL.

These plans represent a change in emphasis of sorts for Cathay, which until now has focused primarily on long-haul operations with its fleet of large Boeing 747-200 and 747-400 freighters. Analysts say the change is partly a result of the downturn that began early last year and partly due to a wider two-year Asian economic slowdown that began in mid-1997. At that time many carriers looked at ways to shift their focus to areas that performed better, and in Cathay's case it came up with a novel way to do that with DHL.

Since March 2000 Cathay has had a three-year arrangement with DHL under which it carries express freight overnight to four Asian points on Airbus A330 and Boeing 777 passenger aircraft that would otherwise remain parked at airports. The tie-up has been judged highly successful for Cathay and DHL, which have since considered expanding it with all-cargo aircraft.

Cathay is not the only airline in Asia looking to expand cargo operations with smaller freighters than the 747 or Boeing MD-11 traditionally operated by the region's carriers. In Japan, All Nippon Airways (ANA) was due on 8 September to put its first freighter, a Boeing 767-300F, into service on regional routes.

Based at Tokyo's Narita airport, the 767-300F will be used in services to Dalian, Tianjin and Qingdao in China, as well as to Hong Kong and to Seoul in South Korea. Seoul services will be operated jointly with affiliate Nippon Cargo Airlines, which operates 10 Boeing 747-100/200Fs.

"With the new freighter, ANA expects additional annual revenue of ¥5 billion ($42 million)," the airline says. "China is going to form the core of ANA's international operations and this is another step in our drive for leadership in Asia."

In China, meanwhile, several carriers are looking to get into the largely untapped domestic cargo market. One is Hainan Airlines, hoping to acquire Boeing 737 freighters, while Shandong Airlines is another. China Southern Airlines, the country's largest airline, recently took delivery of its first purchased 747-400F for long-haul services. It is also expanding domestically, having agreed to buy into China Postal Airlines, which operates a fleet of small Chinese-built freighter aircraft.

In Macau, the former Portuguese enclave west of Hong Kong, Air Macau is planning to get into the cargo business too by adding a leased Boeing 727F for services to Taiwan.

But not all airlines see benefits in operating smaller aircraft. Singapore Airlines, for example, has said it sees no need for what it calls "baby freighters". Subsidiary SIA Cargo operates a large and still-growing fleet of 747-400Fs. And other Asian carriers are expanding with larger freighters. China Southern's second 747-400F is due for delivery soon and will be used to expand US services and open new routes to Europe and the Middle East.

Dragonair in Hong Kong only launched dedicated freighter services in 2000 but plans to add a third 747-300F late this year. In Taiwan, China Airlines continues to grow its freighter fleet by additional purchased 747-400Fs, while rival EVA Air is dry-leasing a 747-400F from Atlas Air.

But the large aircraft are also being used on intra-region routes, and one of the reasons so many carriers have been looking to expand Asian operations is because of the ups and downs in the traditionally important US market in recent years. Asian cargo movements to the USA are still very one-directional, according to several carriers, which say aircraft are often flying full to North America but empty on their return across the Pacific.

What many carriers, such as South Korea's Asiana Airlines, have done as a result is cut return services from the USA, instead routing cargo aircraft onwards across the Atlantic to Europe, from where they return to Asia with heavier loads.

Whatever the airlines do, analysts say, demand for freighters will continue to increase as Asian economies expand and markets still in their infancy such as China "grow up". This bodes well for the manufacturers in terms of sales, as well as for maintenance, repair and overhaul companies looking for conversion work.

Source: Flight International