Center

Air cargo industry takes flight

By Lu Haoting (China Daily)
Updated: 2006-07-11 09:01

"You can fly more cargo out of China, but the problem is what you do with the flight coming into China," Otto said.

"The plane is half empty," Otto added. "It is very difficult for airlines to make profits."

For example, Otto said, if the average price is US$3 per kilogram to carry cargo out of China, the inbound price could be only 10 US cents.

"That's the real danger and limitation on the industry's growth," Otto said.

China's domestic airlines suffer the most from the imbalanced traffic on the Sino-US and Sino-EU routes. Due to a limited overseas sales network and small-scale cargo fleet, China's domestic airlines exist on outbound cargo.

"The freighters of Air China Cargo and China Cargo Airlines often fly empty into China," said Guo Dongmou, an aviation analyst with CITIC Securities.

Air China Cargo and China Cargo Airlines are the country's two largest cargo carriers, respectively owned by Air China and China Eastern Airlines.

China has only 36 freighters, while Korean Air alone has a fleet of 19.

Besides the imbalanced traffic there is concern that a big increase in air cargo transportation capacity into Shanghai since last year might upset the yields of cargo airlines.

Stan Wraight, vice-president of scheduled operations for Volga-Dnepr, owner of AirBridge Cargo, cited Osaka's Kansai International Airport as a similar example, when a rush of capacity entered the then booming Japanese market.

"Yields went down the tubes and with all the additional capacity coming into Shanghai later this year, I think the same will happen," Wraight was quoted as saying in Airline Cargo Management magazine.

The increased capacity in Shanghai comes from not only start-up joint venture carriers such as Great Wall, Shanghai Airlines Cargo and Yangtze River Express, but also from global express delivery giants.

UPS ramped up its services out of Shanghai last April by launching five times a week flights to Cologne and adding three new services to its Shanghai-US route. The company now operates nine weekly non-stop flights between Shanghai and the United States.

"It is something that the market regulates. If there is too much capacity, the yields go down and some carriers will lose out and that will cut capacity again," Otto said.