The pull of China's interior
In May, Cargolux started a twice-weekly freighter service to Chongqing in western China. The European all-cargo outfit joined a slew of international carriers that have added cities in China’s interior to their freighter networks during the past nine months, a list that includes FedEx, Korean Air and Singapore Airlines, not to mention the Chinese carriers.
A few of these carriers have jumped into several emerging points. Lufthansa, which had been one of the first carriers to fly freighters to Chengdu, started MD-11F flights to Chongqing this spring; Cathay Pacific boosted its presence in the interior, which had consisted of scheduled freighters to Chengdu and regular charters to Chongqing, to scheduled cargo flights serving Zhengzhou and Chongqing; AirBridgeCargo, which resumed flights to Zhengzhou last fall after a brief hiatus, added Chongqing and Chengdu to its roster this spring.
Cathay Pacific and ABC have ambitions to ramp up their capacity at the newly developed points as soon as possible. ABC currently runs seven flights a week to Zhengzhou — five are routed over Chengdu, and two fly through Chongqing. “We’re planning to make that 14 flights a week. Ultimately, we should have daily service out of all three points,” says Robert Song, the Russian carrier’s vice president, Asia-Pacific.
Zhengzhou was the most recent addition for Cathay Pacific. It is currently served twice a week, but the plan is to eventually go up to four or five frequencies each week. The carrier’s weekly routings to Chongqing and Chengdu stand at four and three, respectively, at the moment. James Woodrow, the carrier’s general manager of cargo sales and marketing, says that management is considering adding up to six flights a week to each point.
The migration of manufacturing from the coastal provinces to the interior has pushed these new gateways onto the global stage. “Volumes from the interior have been increasing as more high-tech customers moved inland,” notes Li Wenjun, head of airfreight for China at DHL Global Forwarding.
First and foremost, the production of notebooks and smartphones has driven the rise in airfreight demand out of the new points. In addition, the automotive industry is ramping up production in the areas around Chengdu, Chongqing and Zhengzhou. Chongqing — a manufacturing base that includes Hewlett-Packard, Cisco and Acer — is a city about to turn into a center for IT development in China. Airfreight volumes have been somewhat erratic so far, though. “Loads are up and down. It’s feast or famine in Chongqing. It helps that we route our flights over Zhengzhou,” Song says.
Chengdu has a strong contingent of auto manufacturers aside from Foxconn and Intel, leaders in the city’s phalanx of high-tech producers. In Zhengzhou, Foxconn has been the main driver of development. The Taiwanese contract manufacturer has doubled the export volume of the Henan province. “Zhengzhou is one of the fastest-growing centers for electronics manufacturing in the mainland,” remarks Nick Rhodes, director and general manager of cargo at Cathay Pacific.
Song agrees with Rhodes’ assessment of the area. “Our load factors out of Zhengzhou are high,” he says. According to Song, ABC, which was the first international freighter operator in Zhengzhou, carries about 70 percent of the international volume in the market. But, perhaps, not for long, he says.
Others have focused more on the two emerging gateways in the Sichuan province, where they see stronger traffic. “We have volumes out of Zhengzhou, but it is 30 percent of what we have out of Chongqing and Chengdu,” says Gerhard Blumensaat, director for airfreight, central China, at DB Schenker. He found the available main-deck capacity sufficient to cover demand out of the emerging regions. The slump in exports from China has hit the interior as well as the established coastal gateways. Moreover, the pace of the migration inland has slowed.
“A year ago we were of the opinion that the migration would be faster than we had anticipated two years ago. Now it seems not so quick. It looks like we are back to the pace that we expected two years ago,” Blumensaat says.