Domestic and overseas cargo airlines will be allowed to set up ventures in China as the country further loosens its control over the air cargo market.

“Our policy is to encourage airlines to run joint ventures or solely funded ventures as they expand within the air cargo market,” said Li Yongqi, deputy director of Planning and Financial Development for the General Administration of Civil Aviation of China (CAAC).

Li was speaking at the two-day China Air Cargo Summit 2004, which ends Tuesday. Organized by Avail Corp and CAAC, and attended by leaders of the world’s major airlines, the summit focused on developing sustainable growth in China’s competitive air cargo industry.

“Approval procedures for purchasing aircraft will be simplified and rules to approve cargo air routes and flights will be reformed,” Li said.

He said CAAC has received applications from Federal Express of the US to set up a solely funded cargo base in Guangzhou. Shenzhen Airlines has also applied to establish a JV cargo airline with Lufthansa Cargo.

“CAAC is conducting further research into the two projects,” Li said. He did not say whether or when they were expected to be approved.

China first advanced in 2002 an aviation liberalization policy that calls for the air cargo transport sector to develop in an active, gradual, organized and steadfast way.

More than 2.2 million tons of cargo and mail were handled in China last year, up 8.4 percent from 2002 and putting it among the world’s air cargo markets with the most potential.

International cargo and mail totaled 514,000 tons in 2003, an increase of 20.9 percent from the preceding year.

“However, cargo volume accounted for a much lower rate, reaching only 4.6 percent of the global market,” said Song Qinghua, deputy director of CAAC’s International Cooperation Department. He said the cargo volume is expected to rise to 4.7 million tons by 2010 with an annual growth rate of 10 percent.

“The air cargo market in China is quite promising, but it needs more aircraft and flights,” Song said.

At present, China has only 21 cargo planes. Three more are expected to be added to the fleet by the end of the year. “That is still short of meeting growing demand,” Song said.

Industry insiders say the policy to expand the air cargo business is part of the nation’s strategy to become a civil aviation power.

In the past few years, CAAC implemented several measures to stimulate the nation’s air cargo business, said Song. It has set up leading groups with Hainan Province and Shanghai for the further opening up of flight rights, and signed an agreement with the Tianjin municipal government to expand its air cargo business.

According to Li Yongqi, CAAC is encouraging the establishment of certain local air cargo hubs. In addition to Shanghai’s bid to turn Pudong Airport into an air hub, CAAC will give priority to the airports in Tianjin, Guangzhou, Shenzhen, Wuhan and Kunming to create cargo hubs.

“Airlines are encouraged to run cargo bases at these airports,” Li said.

Pudong Airport has established a cargo transport zone consisting of the airport’s own three cargo stations, together with those of China Cargo Airlines and Shanghai Airlines.

(China Daily June 8, 2004)