Cargo leads change in a trading nation
Some of the biggest reforms to China's aviation market have involved air cargo because regulators realise the booming export economy depends on it.
China is one of the world's biggest economies and many of the goods it exports have traditionally been transported by air. Demand for air cargo services is also set to intensify next year when some export tariffs are scrapped.
China has some dedicated cargo carriers, such as Air China Cargo, Yangtze River Express and China Cargo Airlines, and passenger carriers such as China Southern Airlines and Shanghai Airlines are adding freighters.
But the number of freighters in the country is insufficient for an economy of China's size. To overcome this problem, the Civil Aviation Administration of China (CAAC) has sought to increase international cargo services to China by granting more countries fifth-freedom cargo rights, particularly beyond Shanghai.
Singapore Airlines (SIA) Cargo became the first foreign airline to operate flights beyond China to a third country, operating three weekly Boeing 747-400F services on a Singapore-Xiamen-Nanjing-Chicago route since May 2003.
Then, in July 2003, the CAAC signed an air services agreement with Australia paving the way for Qantas to launch a Sydney-Singapore-Shanghai-Chicago cargo service in February this year.
China also signed a new air services agreement with Thailand this year, which lifted restrictions on the number of cargo flights between the two countries and gave Thailand fifth-freedom rights, particularly to South-East Asian countries.
But it was China's new air services agreement with the USA that attracted most attention. Under it, the number of designated passenger and cargo carriers for each country may rise from four to nine over the next six years. The total number of flights allocated by each side will also increase gradually from 54 to 249 a week.
Restrictions on where carriers may land will also be lifted and "carriers from both countries will be allowed to establish cargo hubs" using fifth-freedom rights, says the US Department of Transportation (DoT).
The opportunity to establish cargo hubs in China is significant because FedEx Express is considering a hub at Guangzhou's New Baiyun International airport and hopes to "initiate round-the-world flights connecting China to Europe and Asia as well as North and South America".
United Parcel Service (UPS), meanwhile, says it may establish a hub in China that "will allow UPS to provide centralised transport of goods not only between the USA and China, but also within Asia and other parts of the world".
European carriers also want to capitalise on the strong trade flows between China and the USA, the rest of Asia and Europe.
The German government is negotiating with China for a new air services agreement including liberalisation of cargo services. It is also investing in a new cargo airline based in the southern Chinese city of Shenzhen. This is the first time the Chinese government has allowed a foreign party to establish a foreign carrier in the country.
The new cargo airline will be 51% owned by passenger carrier Shenzhen Airlines, 25% by Lufthansa Cargo, and 24% by a division of Germany's development bank, KfW Bankengruppe, which is 80% owned by the German government.
China's regulators have also sought to increase cargo capacity by granting approval in principle for the establishment of privately owned domestic cargo carriers.
Okay Airways, based in the north-eastern Chinese port city of Tianjin, has gained preliminary approval from the CAAC and aims to operate Boeing 737Fs domestically, as well as passenger aircraft.
Jetwin Air Cargo, which plans to operate Boeing 737-300Fs domestically from Shenzhen, gained preliminary approval from the CAAC last year and expects to gain its air operator's certificate in time to launch in early 2005.
Jetwin assistant general manager Duan Lian says it chose Shenzhen as its base to provide domestic feeder services to international air cargo carriers.
Boeing says in its World Air Cargo Forecast 2004-5: "Strong air traffic [from China] to Asia, Europe and North America drives much of China's air traffic growth." It says China's domestic air cargo traffic increased from 200,000t in 1991 to 1.6 million tonnes in 2003, making it the world's second-largest domestic air cargo market.
Boeing forecasts China's domestic air cargo market will grow 10.6% a year between 2003 and 2023, "with growth at its fastest rate in the 2005-8 period".
Boeing says the "majority of air cargo market activity is concentrated in the coastal and southern provinces" and the biggest city pairs are Beijing-Shanghai, Shanghai-Shenzhen, Guangzhou-Shanghai, Guangzhou-Beijing and Beijing-Shenzhen.
Source: Flight International