What To Expect From India & China

    Remember a couple of years ago when nearly everyone was aiming at some kind of service into China and India?
     So as the world continues into an economic crises like no other here are some up close & personal observations from Air Cargo News FlyingTypers as to what is going on in these vital growth markets and what is likely to lie ahead.

India
     In the latest general elections in India, the Congress-led United Progressive Alliance (UPA) has secured 262 seats, just 10 seats short of a simple majority, giving it a strong mandate to implement reforms.
     Incumbent Manmohan Singh has been sworn in as Prime Minister, making him the second to secure a second mandate.
     The 79-member government has already been formed but a large number of portfolios have yet to be assigned.      The challenges facing the government are significant:
     • Boosting the economy expected to grow by 4.5% in 2009 although the government lacks fiscal room (fiscal deficit and public debt amounted to nearly 10% and 80% of the GDP in 2008 respectively),
     • Attracting more FDI, initiating pro-poor reforms to prevent social unrest and communitarianism, continuing liberalization and deregulation of the economy and addressing internal and external security issues.
     Thanks to its landslide victory, the UPA is able to follow its reform package without much distraction from disruptive coalition members, as was the case under the former administration.
     Amid economic crisis, the landslide victory of the UPA is positive news as the new government is expected to be more stable and more efficient.
     However, challenges facing the new coalition are huge in a context where the government lacks fiscal room to implement its large stimulus package.

China
     China, the engine of Asian growth, has been violently hit by the spillover of the global economic crisis.
     China lost 50% of GDP growth in the last 18 months with a particularly fierce impact in the first quarter 2009 when GDP only rose by 6,1% y/y, a crisis result for a Chinese economy used to double-digit growth figures.
     In January-February, exports and industrial output plummeted and bankruptcies increased rapidly in export-oriented sectors marked by overcapacity (steel, toys, textile...).
     Crashing exports have worsened China’s excess supply conditions, which could push the economy into a deflationary spiral.
     In this context, payment difficulties are up considerably for many private companies hit by flat external demand for their products and the liquidity squeeze in manufacturing sectors especially.
     Social consequences are heavy with a rough estimate of 30 m new unemployed migrants.
     However, when taking into account encouraging signs such as a slower decline in exports and an industrial output going up again since March, one could infer the economic crisis may have bottomed out.
     A gradual but moderate rebound is forecast for the Chinese economy in the second half of 2009 and to a higher extent in 2010 as global demand begins to recover.
     The latest economic developments are explained by the surge in domestic investments in infrastructure (+30% y/y in January-April), boosted by a prompt and large stimulus package (€ 455 bn in 2009-2010) launched last November and soaring bank lending (+29.7% y/y), of which the total amount already reached the 2009 objective late April.
     After aggressive monetary easing until late 2008, further fiscal stimuli could be introduced if necessary by the Chinese authorities and could lead to GDP growth around 7-8%. Beijing can afford to do so thanks to sound public finances.
     China is expected to take the lead in the recovery of emerging economies thanks to a current account surplus, robust retail sales and its strong overall fundamentals.
     China is notably the world’s biggest net creditor, is not vulnerable to foreign capital outflows and has a very low household debt contrary to developed countries.
     Besides, China can better weather the crisis in keeping stable its undervalued renminbi (yuan) and should not let it appreciate until the external demand restores.
     The economic outlook is nevertheless clouded by several factors.
     First, a recent audit showed that the stimuli are partly delayed by local governments, which are responsible for a high share of the planned investments and are slow at starting projects or are choosing to postpone them.
     Second, and more crucially, the global imbalance between the overconsuming U.S. and the oversaving China has contributed to today’s crisis and will not change fundamentally as long as China keeps buying U.S. bonds.
     In order to have similar economic performances as in the past, China definitely needs to reorient its economic structure by boosting domestic demand instead of FDI and exports, to make it become the main driver of growth in the long-term.
     This is within reach, thanks to China’s impressive savings rate (over 53% of GDP).
     But, in order to boost internal consumption of cautious households, incomes in populous rural areas would have to be raised and social welfare nets improved and largely extended.
     Beijing recently pledged to reform its health policy and set up a universal health insurance system by 2020.
     It remains to be seen if enough funds will be invested and if the system will work efficiently.
     Such a process will require several years even if actively implemented, which is far from sure.
     Therefore, a sustainable recovery in China will still depend on a lasting recovery in foreign demand from western economies for which forecasts are grim until at least 2011.
(Gordon Feller)

Mondial DHL LEJ Deal

     General sales agent Mondial Airline Services has landed a substantial coup by marketing the rest capacities of DHL long haul flights out of the express company’s major European hub Leipzig/Halle airport.
     It comprises six flights each week by B747-400Fs en route to Seoul, Hong Kong, and Sharjah. Operator is U.S. capacity provider Polar Air Cargo in which Deutsche Post subsidiary DHL holds a stake of 49 percent.
     According to DHL’s Frank Bakker who is responsible for intercontinental capacity management and charter operations, up to 20 tons of general cargo can be loaded on each of the aforementioned long distance flights by third party providers. This however, goes for DHL’s own operations only and does not include the MD-11Fs Lufthansa Cargo has based at Leipzig/Halle airport.

     These route joint venture flights between DHL and LH Cargo are excluded from any co-loading by GSAs.
     According to Bakker, general sales agent Mondial won the tender because “they offered the best yield, are well established in the Germany market and forecast the highest volumes.”
     Further he confirmed that the contract also includes co-loading on Leipzig-based carrier Aerologic, a DHL and LH Cargo jv, that commences operations June 19, with its first B777F that arrived in Germany mid-May.
     Asked by Air Cargo News Flying Typers Frank Bakker did not preclude extending the collaboration in the near future.
     “If Mondial lives up to the daily performance they have promised I can well imagine including further flights in this co-loading deal for rest capacity,” he announced.
     Mondial’s Managing Director Germany Aytekin Saray said, “This is a major and highly important contract we just won,“
     “Next step we have to take is to promote this deal in order to fill the rest capacities of up to twenty tons per flight with general cargo.”
     He confirmed his company’s keen interest in extending the agreement after the initial stage.
Heiner Siegmund

Tianjin's first flight on June 10.

     China’s newly-established Tianjin Airlines launched its first flight at Tianjin Binhai International Airport on Wednesday morning, actualizing the dream of Tianjin local government to own an airline named by the city.
     Instead of starting from scratch, the new carrier is transformed from the Grand China Express Airlines, subsidiary of China’s fourth largest carrier, Hainan Airlines.
     Last December, Tianjin Port Free Trade Zone Co. Ltd, on behalf of Tianjin local government, invested RMB200 million to fund a joint-venture airline with Hainan Airlines. And Hainan Airlines injected whole assets of its Grand China Express Airlines, amounting to 84.62 percent of the new carrier’s RMB1.3 billion registered capital.
     After preparations of less than half a year, Tianjin Airlines was approved by Civil Aviation Administration of China (CAAC) as the first local airline in Tianjin.
     “Tianjin local government has made great efforts during the preparation period of Tianjin Airlines. With their support, we completed our job to launch Tianjin Airlines in such a short time,” a Hainan Airlines spokesperson said at the opening ceremony of Tianjin Airlines on June 6.
     The words from Hainan Airlines show the importance of government’s support for domestic airlines in China, and also, to some extent, explain why Hainan Airlines was willing to change its carrier’s name while holding controlling stake.
     Tianjin Airlines currently operates China’s largest regional aircraft fleet, with 10 E190jets,12 ERJ145jets and 29 Dornier328-300 jet.
By 2012, the carrier is expected to operate 500 routes with more than 100 planes, including some international flights—an aggressive plan revealed at the ceremony.
David

Another Awards Reality Check      Once again, the business of giving out awards makes headlines at an air cargo industry function.      A room full of delegates attended Air Cargo Munich in Europe last month and had a nice meal followed by another awards gala.      Atlanta Hartsfield Jackson International Airport (HJ International) was named airport of the year, beating out airports in Amsterdam, Frankfurt and Singapore.      Here is reality check Number One:      Atlanta HJ International as Air Cargo Airport of the year is a bit of a fantasy reach, like having dessert before dinner.      The airport cannot and should not be compared to the gateways it supposedly bested as an air cargo address.      Atlanta HJ International is a nice enough airport, and is the busiest for passengers in the world.      But while HJ Intl is vibrant and growing, and in many ways deserves a description as an up and coming air cargo gateway – in a similar manner as Moscow, Chicago or Shanghai – this does not translate to “Airport of the Year” in our book.      What Atlanta HJ International has is aggressive air cargo management and supportive city fathers who are out to build a gateway.      The airport and other interests in the city have reportedly put up a Ruslan full of money to get a paid visit from The International Air Cargo Association (TIACA) in 2012.          Standard of the World? People of Atlanta Air Cargo Association certainly are among the top air cargo professionals anywhere.      Facilities as compared to other gateways are not quite ready for best airport awards.      Here is reality check Number Two:      Gateways like Calgary and Bilbao, Spain (as well as other up and comers are populated with sincere boosters who have drunk the Kool-Aid and are out for air commerce) should realize that they take a big risk hosting a huge international air cargo event where expectations by attendees are high and falling short, in this business climate, can be potentially lethal.      These words may sound tough, but these are hard times and we have heard complaints about awards and air cargo shows again and again from air cargo industry people. It is time to air these thoughts before they fester and stain the well-meaning efforts of quality organizations.      Maybe in the case of Atlanta, HJ Intl’s “award” given in Europe proved too tough a location by comparison.      By casting a top award spotlight on Europe, Atlanta Hartsfield Jackson International cannot help but be compared to at least three airports on the continent that have been crafted, developed and refined for air cargo – Paris, Frankfurt and Amsterdam.      Those gateways and others, including Singapore, export their air cargo expertise, hardware and management to developing and established airports around the world.      Germany has an air cargo-driven infrastructure with facilities, training and professional distribution capability that is a standard of the world.      ATL is an airport of limited international air service as it is dominated by Delta, which has for most of its existence been a domestic USA air mail hauler with little to no regard for air cargo. ATL is simply in a different league when compared to highly developed cargo airports around the world.      So why give an air cargo award to Atlanta Hartsfield Jackson International Airport?      Here follows reality check Number Three:      One gets the feeling after talking to people in the business that awards like these in a year of record air cargo business decline seem to be more about flash and sizzle than substance.      They even appear somewhat silly to the wider industry at large – the stakeholders in air cargo.      We imagine in certain offices the air cargo industry awards are lined up like so many ducks in a row.      As 2009 continues, common sense would dictate the need for a little industry intolerance with awards that are little more than undefined beauty contests. That’s Reality 101. Geoffrey/Flossie Arend