China Cargo Airlines 12 Freighters by 2010

     Recently, China Cargo Airlines signed a contract with Boeing to buy two new 747-400ER Freighters, costing US$428 million.
     The move gained some press but mostly as an indication that Boeing which has struggled securing sales for its B747 line had inched forward in its quest to keep the aircraft in production.
     Insiders however in Shanghai see the move as the first step in what is shaping up as a more aggressive approach by the hometown Shanghai carrier to assert itself domestically and across world markets as a first class air cargo resource.
     China Cargo Airlines is a subsidiary of Shanghai-based China Eastern Airlines, which is one of the three major airlines of China.
     A major shareholder of China Cargo Airlines is China Ocean Shipping Companies Group (COSCO GROUP), one of the largest shipping enterprises of the globe.
     The B747-400 freighters will be delivered to China Cargo Airlines in July 2006 and August 2007.
     It is the first time that China Cargo Airlines purchased Boeing freighters outright, but for the record, China Eastern Airlines has added new aircraft six times since 2004.
     In April 2005, China Eastern Airlines ordered 15 A320’s from Airbus, for US$830 million.
     In March 2005, it spent US$110 to buy 5 Embraer regional aircraft.
     In March 2005, CEA purchased 5 A319 planes from Airbus company.
     All told with 6 B737-700 planes form Boeing in December 2004 and the 20 A330-300 planes from Airbus, the six purchases represent an investment by China Eastern Airlines of about US$ 5 billion.
     China Cargo Airlines currently operates 6 MD-11 all-cargo planes, and one leased B747-400 freighter from a South American Company.
     In addition to the current purchase of two B747-400 freighters, China Cargo Airlines says it plans to buy or rent even more new cargo planes in the future.
     By 2010, China Cargo Airlines plans a cargo fleet of twelve planes, which would position CCA as one of the leading air cargo companies in China.
     China Cargo Airlines, just like its parent company is based in Shanghai, which is the most energetic metropolitan area in China.
     The airline sees its base as an advantage.
     When CCA was founded in 1998 it enjoyed market share in Shanghai of 70 to 80 percent.
     However despite years of continued profits, CCA market share has deceased to 20 percent, although its business continues to grow year by year.
     No doubt increasing competition caused China Cargo Airlines to lose its dominance in Shanghai’s air cargo market.
     Looking ahead CCA will need to both re-equip and market itself aggressively.
     As China becomes further involved in the international economy, more and more foreign airlines are moving service into China.
     Elsewhere domestic China airlines are expanding their air cargo fleets while taking more aggressive market strategies.
     The importance of Shanghai coupled with the abolishment of restrictions on the domestic air cargo business, and the ramping up of civil aviation treaties between China and foreign countries means competition among airlines in China, especially in Shanghai, will only be more intense.
     How to confront the challenges and better compete in the market is a serous problem that China Cargo Airlines has to face.
     The purchase of the two Boeing 747-400 freighters is a clear signal of what China Cargo Airlines will do. These two aircraft will service international air cargo businesses, especially the flight courses to America and Europe.
     Insiders point to expansion of the cargo fleet as only one of the measures that China Cargo Airlines will take.
     The company will also endeavor to improve the transportation efficiency, marketing and custom services of its air cargo product as priority one in the year ahead.
(Han Bing)