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Chinese air cargo shifts from Shanghai to the Three Cs: Chengdu, Chongqing and CGO


The central Chinese city of Zhengzhou may seem obscure, but it is estimated to produce half of the world's iPhones. It is part of the story of Chinese manufacturing shifting from traditional coastal areas to central and western China, where wages are lower. That in turn is contributing to new air services and is directly impacting freight, with demand moving to what Cathay Pacific terms the "Three Cs": Chengdu, Chongqing and CGO (the airport code for Zhengzhou). This trio of cities has collectively overtaken Shanghai as Cathay's largest Chinese freight market.

Volumes at Zhengzhou, the smallest of the three, grew over 40% in 2012 while Chengdu saw steady growth and Chongqing double-digit growth. Shanghai saw single-digit percent decreases.

More resources are being put into establishing Chengdu and Chongqing as western capitals for China, and passenger services have flowed, with British Airways and Qatar Airways the latest to announce service to Chengdu. Finnair and Qatar already serve Chongqing. Zhengzhou maintains a less diversified economy and so sees a heavy presence of dedicated freighters and no intercontinental services.

Strong growth at Three Cs as Shanghai declines

Zhengzhou in the first 11 months of 2012 (the latest data available) recorded 46% higher growth in volume (130,400 tonnes) than the corresponding period a year earlier, which in turn recorded growth over 2010.

Zhengzhou Airport monthly cargo volume (tonnes): 2010-2012

Chengdu recorded slower growth at 5.5% through the first 11 months of 2012, but off a much higher base, carrying 444,800 tonnes. 2011 volumes were typically above 2010 levels.

Chengdu Airport monthly cargo volume (tonnes): 2010-2012

Chongqing recorded 15% growth in the first 11 months of 2012, carrying 244,100 tonnes.

Chongqing Airport monthly cargo volume (tonnes): 2010-2012

Shanghai, once the stronghold and also the largest market for Cathay Pacific, is lagging. At Pudong airport, the main international port, cargo volumes decreased 5.3% for all of 2012 compared to 2011 (which under-performed compared to 2010), but at 2.9 million tonnes moved in 2012, the airport is still a heavyweight.

Shanghai Pudong Airport monthly cargo volume (tonnes): 2010-2012

Smaller Shanghai Hongqiao, primarily a domestic airport, saw 3.6% growth (Oct-2012 and Dec-2012 figures are unreported) to 396,400 tonnes – more than Zhengzhou or Chongqing but less than Chengdu. As at Pudong, 2012 levels were under 2011's, which in turn were lower than 2010's.

Shanghai Hongqiao Airport monthly cargo volume (tonnes): 2010-2012

Hangzhou, west of Shanghai, saw 10% growth (Oct-2012 and Dec-2012 figures are also unreported) to 274,600 tonnes. Although having much smaller volumes than Pudong, 2012 levels so far represent growth over 2011, which were higher than 2010 levels.

Hangzhou Airport monthly cargo volume (tonnes): 2010-2012

In the heart of the Pearl River Delta manufacturing hub, Guangzhou reported 5.8% growth to 1.2 million tonnes for all of 2012. 2012 volumes were above 2011 levels, which were above 2010 levels. The airport is well established as a freight hub, but it too is losing momentum as new competitors arise.

Guangzhou Airport monthly cargo volume (tonnes): 2010-2012

Also in the Pearl River Delta area, Shenzhen saw 3% growth to 852,900 tonnes for all of 2012.

Shenzhen Airport monthly cargo volume (tonnes): 2010-2012

These figures are consistent with airline reports that cargo volumes are recovering. Yields, however, are not, and profitability is further impacted by lower load factors.

Chengdu, largest of the Three Cs, has attracted the most intercontinental flights

Chengdu is already home to intercontinental operators Etihad Airways and KLM. Later this year British Airways and Qatar Airways will join them. Dedicated freighter service is provided by Air China. Other Air China flights (as well as from other operators, including AirAsia X) carry freight in the hold of passenger aircraft.

Intercontinental passengers routes, served and announced, and all cargo flights for Chengdu Airport: 18-Feb-2013 to 24-Feb-2013

Airline Route Flight Type Equipment Frequency Effective, if applicable
Air China Chengdu-Frankfurt Passenger A330 3x weekly 19-May-2013
Air China Chengdu-Shanghai Pudong Freight 747-400F 3x weekly  
AirBridgeCargo Chengdu-Zhengzhou Freight 747-400F 6x weekly  
Cathay Pacific Chengdu-Hong Kong Freight 747F 2x weekly  
Cathay Pacific Chengdu-Shanghai Pudong Freight 747F 3x weekly  
British Airways Chengdu-London Heathrow Passenger 777-200 3x weekly 22-Sep-2013
Etihad Airways Chengdu-Abu Dhabi Passenger A330-200 4x weekly  
KLM Chengdu-Amsterdam Passenger 747-400 Combi 3x weekly  
Qatar Airways Chengdu-Doha Passenger A330-200 3x weekly 19-Mar-2013

Chongqing, in the middle, sees mixture of freight and passenger services

Chongqing has a lighter passenger network, and with no planned route introductions, but more dedicated freighter services.

Intercontinental passengers routes, served and announced, and all cargo flights for Chongqing Airport: 18-Feb-2013 to 24-Feb-2013

Airline Route Flight Type Equipment Frequency
Air China Chennai-Chongqing-Shanghai Pudong Freight 747-400F 2x weekly
Air China Shanghai Pudong-Chongqing-Novosibirsk Freight 747-400F 2x weekly
Cathay Pacific Chongqing-Hong Kong Freight 747F 2x weekly
Cathay Pacific Chongqing-Shanghai Pudong Freight 747F 2x weekly
China Airlines Chongqing-Taipei Freight 747-400F 1x weekly
China Southern Guangzhou-Chongqing-Amsterdam Freight 777-200LRF 2x weekly
Finnair Chongqing-Helsinki Passenger A340 4x weekly
Qatar Airways Chongqing-Doha Passenger A330-200 3x weekly
Qantas Sydney-Chongqing-Shanghai Pudong-Chicago Freight 747-400F 1x weekly

Zhengzhou, home to iPhone and smallest but fastest-growing, has no intercontinental passenger flights

Zhengzhou sees no intercontinental passenger services and its sole widebody passenger service is twice-weekly EVA Air flights to Taipei, and sometimes Korean Air A330s, depending on the schedule. Nonetheless Zhengzhou in 2011 saw the largest growth rate in foreign trade in China. Foreign trade in the city was expected to double in 2012 to USD60 billion from USD32.6 billion.

Foxconn, the manufacturer producing items including the iPhone, comprised about half of all foreign trade in the city in 2011 and is expected to have increased that share in 2012 to two-thirds.

Zhengzhou airport has spoken of interest in attracting routes to Dubai, Istanbul and Kuala Lumpur but has not provided a timescale for this. It is common for Chinese airports to mention aspirational goals rather than near-term realities.

Intercontinental passengers routes, served and announced, and all cargo flights for Zhengzhou Airport: 18-Feb-2013 to 24-Feb-2013

Airline Route Flight Type Equipment Frequency
Air China Zhengzhou-Shanghai Pudong Freight 747-400F 2x weekly
AirBridgeCargo Chengdu-Zhengzhou-Moscow Freight 747-400F 6x weekly
AirBridgeCargo Zhengzhou-Krasnoyarsk Freight 747-400F 1x weekly
Hong Kong Airlines Hong Kong-Tianjin-Zhengzhou Freight A330-200F 5x weekly
UPS Zhengzhou-Seoul Incheon Freight 767-300F 5x weekly
Zhengzhou Zhengzhou-Hong Kong Freight 747F 6x weekly

Like many airports in China, Zhengzhou is expanding. The airport commenced construction work on a RMB15.4 billion (USD2.4 billion) expansion project on 19-Dec-2012 that is expected to take three years to complete. It includes construction of a 310,000 sqm terminal (T2) and a 3600x60m second runway. The target for the project is 29 million passengers, 500,000 tonnes of cargo and 236,000 aircraft movements per annum by 2020.

Additionally, Hina Group, according to local reports, intends to build the Zhengzhou Aviation Economic Comprehensive Experimental Zone and develop Zhengzhou city into a major aviation cluster by 2020. The plan, which awaits further details, falls under the Central Plains Economic Zone Plan from the National Development and Reform Commission (NDRC), which effectively plans China's economy.

An opportunity, but also need to balance freight with passengers in volatile times

Freight is an important part of the route planning equation, especially in Asia - and China in particular. Chengdu and to a lesser extent Chongqing have shown manufacturing with a diversified economy can lead to dedicated freight services but also intercontinental passenger flights, which are more high-profile for cities. Although Zhengzhou has global aspirations, it still has some time to expand beyond its mighty manufacturing status.

As airlines weigh the future of dedicated cargo operations – China Airlines for one wants to de-emphasise freight's contribution to its business – these cities will see the impact of that outcome as airlines either continue with dedicated freighter service or pull-down in favour of passenger flights with cargo space in the hold.

And, in turn, as these and other cities expand their own range of direct longhaul connections, their reliance on existing hubs like Pudong (and Hong Kong) will diminish progressively.

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