A state of disorder has emerged in China's air-freight industry after five courier firms have had their licenses for air-freight services suspended within three weeks for breaking air-freight safety code.

The China Air Transport Association, which represents China's airlines, suspended the air-freight license of Beijing Feilishi Express last Tuesday because the courier firm was found forging a stamp of China Southern Airlines to transport inflammable materials.

Earlier, four Shanghai couriers, including Yunda and YTO, had their licenses suspended for a year because they failed to report inflammable materials, including two lithium batteries which are banned on board aircraft, in their cargo, causing a small fire on a China Southern flight after it landed.

"All membership carriers of the association should refuse to transport cargo for the four couriers during the suspension," the association said.

The modus operandi, or method of operation, of air-freight service industry in China includes subcontracting among courier firms, agents and airlines which facilitate the carriage of some forbidden materials on board aircraft, said Xu Yong, a chief analyst at Logistic News and Information.

In reality, the courier firms pass the cargo to the shipping agents who then bargain with the airlines to get lower prices, said an official with a local courier firm who asked not to be named.

"Since more than 70 percent of air-freight cargos in the country are actually undertaken by the agents, the punishment would have little impact on the courier firms," he added.

Cargos can be carried by freight aircraft and in the cargo hold of passenger aircraft. China's civil aviation industry has flown 5.7 million ton-kilometers of cargos in 2011, which may climb by 15 percent this year, according to the China Traffic and Transportation Association.

As China had only 91 cargo aircraft at the end of last year, courier companies and the agents also compete fiercely for space in the cargo holds of passenger aircraft.

"Amid rapid growth of China's courier demands, the courier firms have to rely on the agents to book cargo space with the airlines," the courier official said.

To solve the problem, a growing number of express companies are setting up their own freight jet fleet.

Shanghai-based YTO Express seeks to invest 5.5 billion yuan (US$883 million) within 10 years to set up its own cargo aircraft fleet. The fleet announcement coincided with the suspension of the air-freight service licenses.

"The punishment may slow our plan to set up the fleet as we have to overhaul the company first," said Lang Hongfei, vice president of YTO Express.

The new freight aircraft company will be based in Xiaoshan International Airport in Hangzhou, east China's Zhejiang Province.

YTO has leased two cargo aircraft, but land transport still accounts for 98 percent of its total services, according to Lang.

STO Express, another Shanghai-based courier company, revealed that it plans to acquire an aviation company next year to establish a fleet of at least seven cargo aircraft.

"We have seen the necessity to have our own aircraft," said Xiong Dahai, vice president of STO. Xiong said future air-freight services will account for 25 percent of the firm's business.

Currently, SF Express and China Post's EMS, or Express Mail Service, own their own freight aircraft.

Source:
http://www.shanghaidaily.com/nsp/Business/2012/12/03/License%2Bhalt%2Bcasts%2Bdark%2Bcloud%2Bover%2Bair