Given the opportunity to say “I told you so”, Wraight was happy to oblige: “This was so easy to see coming,”he said.
And he warned that the current problem was “just the tip of the iceberg”. Not only were a whole list of Asian carriers about to add more freighter capacity, but there were also signs that some electronics companies were already relocating their manufacturing from China to lower costcountries such as Bangladesh.
“In addition, after the Olympics, the Chinese government will have to do something about the currency and trade imbalance,” Wraight suggested. “This will hit most the carriers who depend on China for their income, particularly the European ones.”
Willy Lin, chairman, Hong Kong Shippers Council agreed that manufacturing costs in China were rising, with the minimum wage up 15-20 per cent in the past year, but he pointed out that low wages of as little as 250 RMB (US$33.24) a month were stillthe norm in the interior.
He was sanguine about the current over-capacity situation. “In the last 30 years, there have always been cycles and if I could have a perfect match of cargo and demand, I would be afortune teller,” he said.
Meanwhile, if some manufacturing moved back to Bangladesh or Malaysia, it would also not be a bad thing, he suggested. “That is what the World Trade Organisation is about– the survival of the fi ttest,” he said.“It makes sense to spread your productionwidely.”
From the US perspective, Neel Shah, vice president sales and marketing, United Airlines Cargo, also looked forward to a revaluation of the Chinese currency after the 2008 Olympics. He reckoned that if left to fl oat freely it could appreciate by asmuch as 40 per cent.
“You would then see the Chinese surplus disappear very quickly,” he said. He added that even without such a change, US exports to China had risen 30 per cent in 2006, albeit from a relatively low base.
The panel was then asked if a shift of freighter capacity away from the major hubs to lesser airports might be the answer. Wraight was sceptical, predicting Shanghai, Beijing and Guangzhou would remain the main entry points for cargo for the foreseeablefuture.
“You can’t fl y an MD-11 or 747 freighter to Xiamen with fi ve tonnes on board,” he said. “If people in Xiamen can’t buy imports, the service will not be economical.” A better solution would be to set up a good distribution system within China, using belly capacity.
Shah also pointed out that combination carriers would be unlikely to serve these lesser hubs with long-haul service any time soon, because there would be not enough passenger demand. But he said United was sending sales staff out to such cities to try and keep cargofeeding into the main hubs.
The Round Table discussion also looked at the broader picture in Asia, and whether the slowdown in export cargo there would continue. Lin said he did not see a lot of slowing down in his business, though he was seeing more and more cargo coming in small batches which was putting more strainon the supply chain.
Shah said the market out of Asia had softened for United, however.“Our planes are still full, but yieldsare a lot worse.” he said.