China Southern adds cargo hub

China Southern Airlines is planning to build and operate Shenzhen International Airport's biggest cargo centre with a handling capacity of 250,000 tonnes, intensifying the competition with Hong Kong for Guangdong's burgeoning exports.

The cargo centre, expected to begin operations next year, would more than double Shenzhen airport's annual handling capacity to 450,000 tonnes.

The move forms part of China Southern's strategy to boost cargo operations before the mainland's accession to the World Trade Organisation - using Shenzhen as its international hub.

The carrier's existing cargo services from Shenzhen to the United States are operating at almost 100 per cent capacity, and it is expecting demand growth to accelerate in the coming years.

President Yan Zhiqin said the airline would build a dedicated cargo fleet by acquiring three more Boeing 747-400 freighters over the next two years.

Cargo accounts for only 8 per cent of the Guangzhou-based airline's revenues.

"Our new Shenzhen cargo centre will serve as a major freight hub, distributing cargo collected throughout China to the United States and other international markets," Mr Yan said.

China Southern is banking on the accelerating growth in the mainland's economy and the WTO membership to create more demand for its air freight services.

The mainland economy expanded 8.2 per cent in the first half of the year, propelled by a 38 per cent surge in exports.

Industrial output grew at its fastest pace in July, rising 13 per cent from the year-earlier period.

Much of the mainland's high value-added manufacturing is in the Pearl River Delta region, and is exported through the SAR, Shenzhen and Guangzhou.

So far, much of the region's air cargo exports have gone to Chek Lap Kok, which has an annual capacity of three million tonnes.

However, China Southern is hoping the lower charges at Shenzhen will give it a larger share.

For one kilogram of cargo, the handling charge at Shenzhen airport is 35 HK cents, compared with HK$2 at Chek Lap Kok, China Southern said.

Landing fees, overflying fees and approaching instruction fees at Chek Lap Kok were more than HK$70,000 per flight, against HK$21,000 at Shenzhen, the airline said.

However, these claims were rejected by the Hong Kong Airport Authority, which accused China Southern of distorting the charges.

"That's grossly inaccurate," Airport Authority spokesman Chris Donnolley said.

"Airlines are notorious at bending the figures and that's the best I've heard so far."

Mr Donnolley said the maximum charge levied by the authority on freighter aircraft was HK$26,000 for a Boeing 747-400, assuming a four-hour turnaround. He said landing charges at Shenzhen were, in fact, more expensive.

According to the International Air Traffic Association, the highest airport charges in Hong Kong were US$5,216 for a Boeing 747 passenger aircraft, compared with US$8,750 charged by the mainland's international airports.

Mark Ashall, director of sales of Hong Kong Air Cargo Terminals, said it would be cheaper to ship cargo through Shenzhen rather than the SAR.

However, Mr Ashall believed the greater number of flights and the services offered at Chek Lap Kok would allow it to retain its competitive position.