Rising imports, more demand from the interior, and slower export growth from southern regions and Hong Kong will all be features of the Chinese air cargo sector next year, according to the China manager of one of the world’s leading forwarders.
     Jens Drewes, Managing Director, Kuehne + Nagel Central and Northern China, said the market in 2011had been marked by high volatility and the coming months were “expected to remain demanding.”
Air freight volumes ex-China had suffered a slight decrease on the export side in 2011 as some shippers moved from air freight to sea freight. However, imports increased and this will continue into this year.
     “In line with China’s five-year plan and the government’s intention to lessen its dependency on exports and constructions to local consumption, imports are expected to increase in the next years to come,” he said.      “The rise in imports is expected to continue due to the appreciation of RMB as well as improved living standards in China. The development will also depend on the further development of the inflation rate in China.”
     Drewes said a more balanced trade would enable K+N to improve “flexibilities” when negotiating with its carrier partners on space and frequency arrangements, which would allow it to boost service levels.
     “This is particularly important for cities in the Western provinces such as Chengdu and Chongqing where multinational companies have established their manufacturing facilities,” he added.
     “The logistics infrastructure facilities there are not as advanced as those in the coastal areas. Under such circumstance, it is of direct interest for our carrier partners to offer better conditions for regular round trips, that is, between Europe and China’s cities.”
     K+N offers a range of services in China including airport-to-airport and door-to-door service, consolidation, charter and sea-air services via its presence in some 35 cities within China.
     As has also been reported by other forwarders, the need to extend this footprint ever westwards remains a priority as manufacturers are encouraged by government policy and inflationary costs in southern China to relocate inland. Recently, new branches were opened in Fuzhou, Wuxi, Zhengzhou, Taicang, Yangzhou, and Yinchuan, with further expansion scheduled over the next three years designed to take the Switzerland-based company’s network to over 50 cities, from which integrated logistics solutions can be offered.
     Drewes said the Western migration by industry within China was especially noticeable for multinationals in the high tech, industrial goods and automotive industries.
     “For many years the Chinese government has been attaching high significance on inland cities to boost the domestic consumption—for example, three of the nine new logistics zones proposed by the central government are located in inland China,” he explained.
     “Rising costs of manpower (and other inputs) in the eastern provinces along the Chinese coast are one major reason for many global manufacturers to move their facilities and productions to the western parts of the country.
     “The hinterland of China is also a huge market with a large potential for the named industries. China is already the largest automotive market and according to recent reports, China had also surpassed the USA in terms of PC sales in the second quarter of 2011.
     “The airfreight market in in-land cities is not mature yet. In many cases, there is still a lack of sophisticated infrastructure such as terminal, facility etc., or soft skills. However areas such as Chongqing, Chengdu or Zhengzhou are improving the local conditions. They are making good progress which is clearly noticeable.”
SkyKing

     Barely a month into his role as India's Civil Aviation Minister, the Illinois Institute of Technology-educated Ajit Singh has asserted himself and scrapped a global tender floated by Air India for the sale of six B737-200 freighters, along with its spares. It will not be out of place to mention that the Minister has gone on record to say that he will go all out to revive the struggling Indian aviation industry, which is witnessing whopping losses.
     In a recent interview, the Minister said, “I do not think there can be revival without tough decisions. We will take tough decisions…” He obviously had Air India on his mind, but his words hold equally true for the whole sector.
     The move by the Minister to scrap the tender has sparked enough interest among air cargo stakeholders to start asking whether Air India was planning to start cargo services again. While that may not happen soon, Ajit Singh has made it clear that he will take initiatives, but go by the book. He has his work cut out for him, having stepped into the portals of Rajiv Gandhi Bhavan (the Civil Aviation Ministry headquarters at Delhi) at the most crucial moment in the history of Indian aviation. He has to battle against heavy odds: high fuel prices, a floundering Air India, high passenger volumes, and much more.
     The sale of the freighters was part of a big plan to boost the carrier’s financial position. The plan included the lease of five of its eight B 777-200 planes for between 8 and 10 years, and the sale and leaseback of the first seven Boeing 787 Dreamliners, which will join the Air India fleet in the middle of this year. It has been estimated that the leaseback and sale would bring $530 million to the beleaguered carrier.
     The six Boeing 737-200 freighters—each one around 30 years old—were part of the Alliance Air fleet (Alliance Air, a regional sister airline of the erstwhile Indian Airlines, was turned into a cargo airline) and three of them, in fact, were leased to India Post for postal charters. The planes were converted to freighters in 2007 when a decision was taken to start an all-India cargo service, with Nagpur as the hub.
     Apparently, soon after Ajit Singh took over, officials in the ministry pointed out to him that the tender that was floated for the sale of the freighters was not properly framed. According to sources in the ministry, the tender did not mention the reserve price and could have been manipulated to suit a buyer. Aviation sources also pointed out that the planes had only flown for a few months after their conversion and could fetch a good price. Added to that are eight spare engines, each of which can rake in at least Rs 20 crore (one crore is ten million Indian rupees and at today’s rates, one U.S. dollar is Rs 50), four APUs, seats and more. The Technical Bids, based on the highest bid, were to be opened on February 8. Now that the Minister has ordered the scrapping of the tender and instituted an inquiry, it remains to be seen when—or if at all—the freighters are sold.
     Unfazed by the Minister’s order to scrap the tender, an Air India spokesperson said that the tender would go through and the last date for submission was being extended by a month. Now, the tenders would be opened on March 5, 2012.
     Incidentally, Air India sold four A-310 freighters quite some time ago. The national carrier’s move to sell the freighters comes at a crucial time: the country’s air cargo sector is, according to estimates, expected to grow at 10 percent per year by 2014, while the sector is set to expand by 8.5 percent per year for the next five years.
Tirthankar Ghosh

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