The pull of China's interior
At their new feeding grounds, freighters also have to contend with rising belly capacity, most of which comes courtesy of the Chinese carriers. “Belly capacity is a good supplement to our freighter operations in the interior,” remarks Titus Diu, chief operating officer of Air China Cargo. The airline’s belly capacity has grown considerably with the introduction of B777ERs, which started coming on stream last year. For the most part, though, Chinese carriers are using narrow-body passenger planes to the emerging markets, which limits the scope for belly-hold cargo.
“Chengdu has wide-body belly space connecting with Beijing and Shanghai. Chongqing and Zhengzhou’s belly capacity is not sufficient ,as the flights to Beijing and Shanghai have only narrow-body aircraft, which are not suitable for pallet shipment,” DHL’s Wenjun says.
The large Chinese carriers have all deployed freighters at the new gateways and plan to increase capacity when demand goes up. China Southern Airlines earlier added a stop in Chongqing on the Guangzhou-Amsterdam route. When the time is ripe, it will look at putting freighters into Chengdu and Chongqing, remarks Luo Laijun, senior vice president of China Southern Cargo.
The Chinese carriers have shown significant improvement in their transit capabilities, moving further away from their traditional focus on point-to-point traffic, Blumensaat observes. This, and the arrival of more direct lift to European destinations, has improved transit times. For freight heading to North America, the relative scarcity of capacity means that transit times from China’s interior are still markedly longer than those from the coastal gateways. “For Europe and the Asia-Pacific, the transit time is still the same level as for traditional gateways, but for U.S. lanes, the transit time will be one to two days longer due to few direct solutions there,” Wenjun says.
ABC has ambitions to mount a China-U.S. operation on a trans-polar route, a plan that would bring down transit times between the two markets. This scenario is not going to materialize in the near future, however, as the carrier lacks the requisite number of aircraft. “We are not interested in operating anywhere twice a week. We want daily or twice-daily,” Song says. He describes Zhengzhou as a leading candidate for such a service. ABC is bullish about the city’s export volumes, but even more so about imports. With two populous provinces next to each other, a well-developed rail and road network, and ample space for warehousing facilities, Zhengzhou would make an excellent distribution point for imports into central China, he argues.
Moreover, distribution costs would be significantly lower than in the coastal areas, but this argument has not cut a lot of ice with importers so far. Even for companies that have moved production inland, most distribution and supply-chain management is still managed from the coastal regions, Blumensaat observes.
At this point, Zhengzhou would probably be struggling to assume a large role as a distribution hub. The airport’s cargo infrastructure has serious limitations, although a recently built facility for domestic cargo has given operators some breathing space. By the same token, forwarders report that the cargo infrastructure at Chengdu and Chongqing is insufficient to handle the projected growth on their doorstep.
“Chongqing and Chengdu will experience some problems on the facility side. They are already short of space. There is not sufficient land to park freighters. On a long-term basis, that is a worry for us,” Song comments. “Zhengzhou still has a lot of land available.”
Blumensaat is not concerned about the infrastructure shortcomings. Previous infrastructure development drives in China suggest that infrastructure development will not lag far behind the pace of growth, he says. Moreover, the airport authorities at Zhengzhou, Chongqing and Chengdu have been eager to draw in more freighter flights. However, sluggish conditions for imports and exports suggest that these airports are facing an uphill battle for the foreseeable future. Forwarders and carriers expect some improvement in the second half of this year, but nobody is predicting a strong peak and a surge in volumes.