[120713.EN.LOG] Rail, Road Rivals Have China Air Carriers Looking For High-end Cargo

CHINA has posted the latest road network development plan for the period from 2013 to 2030 that aims at same day delivery for shipments moving a distance less than 1,000 kilometres.

The initiative has put pressure on the air transport industry in addition to China's reformed railway sector, which is also targeting express delivery as its way forward.

China Eastern Wuhan deputy manager Zeng Huagang flew to the carrier's headquarters in Shanghai to discuss the impact on air transport brought by the rapid development of road and railway service.

Besides China Eastern, the other two largest carriers in China, Air China and China Southern Airlines, are also to discuss reposition of themselves to avoid clashing with road and rail carriers.

Air transport has lost its advantage in distance less than 1,000 kilometres, said Mr Zeng. Whatever ways to ship their cargo, if time is the same, customers will definitely choose the cheapest way, he said.

Air China's Wuhan branch manager Yu Jianmin agreed, saying Wuhan's traffic network, comprising of railway, road, air and waterway, is highly developed. The market of moving cargo less than a thousand kilometres will be taken by railway, road and waterway. Air transport might need to lower its price.

How to win the competition between air and ground? The three largest domestic air carriers all agreed that the air freight industry should look to shifting their target to high-end market.

But Mr Yu pointed out that even the competition were not becoming more intense, air carriers only take up a small portion of the domestic cargo movement, about 10 to 15 per cent. The carrier's focus will still be on international shipments.

Mr Yu said Air China has formed an international network with Beijing and Shanghai as hub. Wuhan is a major source of their shipments, contributing mostly electronic, agricultural products and garments.

Wuhan has launched quite a few international flights in the past two years. China Eastern's Mr Zeng said, these new services have brought great business potential.

Mr Yu said in the future, an air carrier will need to earn 70 per cent of its revenue from international cargo services which take up only 20 per cent of its business.

Source : HKSG.