China’s domestic cargo expected to soar

 - December 4, 2006, 2:24 PM

China’s red-hot air cargo export market is expected to cool somewhat this year, but domestic demand for new freighters is projected to take off. That was the consensus from last week’s Airfreight Asia conference, held in Shanghai. During the event, EADS-EFW and China Eastern Airlines signed a deal to convert three A300-600s to freighter configuration, with more to come.

The world’s major cargo carriers have rushed to serve Shanghai and (to a lesser extent) Beijing and Guangzhou. China now operates a virtual “Open Skies” policy for cargo, and has encouraged carriers such as Martinair and Singapore Airlines to serve inland cities. But the traffic is highly imbalanced, mirroring China’s huge trade surplus with U.S. and Europe. Boeing 747 Freighters fly virtually empty into China, but leave chock-full.

China’s own carriers have been preoccupied with passenger traffic. But they are now busy adding freighters and setting up joint ventures, noted Dr. Liu Feng, director of international affairs for China’s aviation authority. She promised conference delegates that China’s liberalization of the air cargo market would continue, including so-called “soft rights” allowing foreign airport ground handling and logistics companies to operate in China. The major integrators such as FedEx, TNT and UPS have already announced buyouts of their local joint ventures for trucking and warehousing.

Private Cargo

China’s first privately owned airline–Tianjin-based Okay Airways–will start operations as a domestic freight carrier. While the 20-percent growth rates seen recently in export cargo is expected to drop to 10 percent, domestic air cargo is projected to grow 20 percent in China this year to reach 3.7 million tons, predicted Kevin Casey, vice president business development for Pemco Aviation. His company offers 737-200/300/400 passenger-to-freighter conversions that have already found two customers in China: Hainan Airlines and Yangtze River Express. Pemco has signed deals with TAECO in Xiamen and STAECO in Jinan to join its program.

Meanwhile, Shanghai Airlines has just become the first carrier to introduce the 757-200 freighter conversion designed by Precision Conversions.

China Eastern plans to have more than 20 freighters by 2010, said president Liu Chaogeng. The carrier has already converted six of its MD-11s, and ordered two new-build 747-400Fs. The three A300 freighters ordered last week will fill the last conversions slots available at Dresden until mid-2008, according to EADS-EFW. This is the only facility doing Airbus freighter conversions at present, but U.S. company FSI is rumored to be negotiating with China Southern Airlines to start a rival A300 conversion line in Guangzhou.