During the final week of 2017, Feng Zhenglin, the director of the Civil Aviation Administration of China told delegates at a conference in Beijing that the CAAC estimated air cargo volumes carried by China-based carriers rose 6.6% y-o-y in 2017, to 7.12 million tonnes, according to a report in Xinhua. Although there was no mention of cargo traffic, recent data suggests growth will be in the low double-digit range, driven primarily by demand for international cargo. Growth for domestic air cargo meanwhile, appears to have been rather tepid in 2017.
But just how is this possible given China’s seemingly incessant e-commerce driven express demand?
For the first ten months of 2017, the CAAC reported total cargo traffic transported by carriers based in mainland China rose 9.9% y-o-y, nearly on-par with the total market average, which, according to IATA, was 9.7%. But this figure was driven by international cargo traffic that was 13.6% higher. Domestic traffic was reported to have risen by only 2.2% y-o-y, through October 2017.
Turning now to China’s main combination carriers, the story appears to be much the same. Air China Cargo reported international FTKs up 10.9% y-o-y, through November, but domestic traffic up only 0.5%. Similarly, China Southern reported international cargo traffic surged 20.38% y-o-y, for the first eleven months of 2017. China Southern’s domestic cargo traffic meanwhile, was negative, down 2.71%.
This slow-to-negative demand growth for domestic air cargo reported by China’s combination carriers can be attributed, at least partially to the expanding freighter fleets of China’s express carriers. As express fleets grow, belly space on passenger flights is no longer the only option for domestic air freight. But even if a shift from belly-to-freighter is occurring in parallel with growing express carrier fleets, we would expect the size of China’s domestic air cargo market to continue growing. For the first ten months of 2017 through October, overall domestic tonnage carried by China-based carriers rose by just 2.9% y-o-y.
This low-growth figure seems to be indicative of the limits to the pace at which Chinese express carriers can add freighters, but also the bellyhold’s unsuitability for carrying domestic express cargo in China as the country’s domestic air express networks are active overnight when there are few passenger flights.
SF Express, which currently operates China’s largest express freighter fleet has been adding aircraft as rapidly as possible. Yet in 2017, SF added just five aircraft to its fleet. This low number was in part due to the lengthy process of finding crews to operate newly-delivered aircraft. But more likely, fleet growth of five aircraft per-year appears to be a growth rate express carriers are softly-bound to by the CAAC. No other Chinese freighter operator added more than three aircraft to its fleet throughout 2017.
Those interested in learning more about China’s appetite for freighters, are invited to join us at this year’s Cargo Facts Asia, to be held 23-25 April at the Mandarin Oriental Pudong in Shanghai. To checkout this year’s exciting agenda, or to register, visit www.cargofactsasia.com.