BEIJING - Jade Cargo International Company Ltd, China's first air cargo joint venture, has suspended its service as the Asia-Pacific freight market is hampered by weak demand.

The suspension, which stems from a weak demand for air-shipping services, is to be temporary. Jade Cargo plans to give company shareholders an opportunity to reform its financial structure, it said in a statement.

Shenzhen Airlines owns 51 percent of the joint venture, the German air shipper Lufthansa Cargo AG owns 25 percent and the German development bank DEG owns 24 percent. Jade Cargo was founded in 2004 and, until the suspension, operated a fleet of six B747s, which fly to such foreign destinations as Frankfurt and Dubai, as well as to Shanghai, Chengdu and other Chinese cities.

Earlier media reports said Lufthansa Cargo intends to withdraw from the Chinese market.

"We are leaving all options open," Karl Ulrich Garnadt, chief executive officer of Lufthansa Cargo, said at the Reuters Global Manufacturing and Transportation Summit in December.

Beyond the weak demand for air shipping, Garnadt said Lufthansa Cargo has known for years that Jade Cargo was undercapitalized.

Christoph Franz, Lufthansa group chief executive officer, said in October that the Chinese market was becoming more difficult to do business in and that the company would review its investment in Jade Cargo, according to Reuters

The international demand for air cargo is decreasing because of the West's economic decline and Asian carriers are seeing some of the worst consequences from the falling trade in exports, business insiders said.

The International Air Transport Association released global traffic statistics for November showing that the market for air cargo remained weak in that month.

Asia-Pacific freight carriers have seen the steepest decline in transport volumes as a result of US and European consumers' falling demand for goods manufactured in Asia, according to the association. From November 2010 to November 2011, shippers in the region saw the volume of goods they were transporting decline by 6.4 percent.

"The weak global economic performance is being reflected in air transport markets and freight markets have contracted some 4 percent from what they were in January," said Tony Tyler, chief executive officer for the International Air Transport Association.

Statistics from the Civil Aviation Administration of China also show that, from October to November, the volume of cargo and mail transported by Chinese carriers decreased by 3.1 percent, while the volume of cargo and mail on international routes decreased by 16.3 percent.

Even so, it is unlikely that large foreign carriers will withdraw from the Chinese market, one of the fastest-growing for air cargo in the world, analysts said.

"Large international shipping-and-storage companies, including UPS, TNT and DHL, together have more than an 80 percent share of international air cargo markets and are strong enough to withstand weak demand," said Li Lei, an aviation analyst with CITIC China Securities Co Ltd.

"I even doubt that Lufthansa Cargo will withdraw from China, especially since they spent so much to enter the market here," he said.

Li said Chinese carriers may be interested in owning shares of Jade Cargo, both because it is a small company and because they are likely to be inexpensive.

China Daily

(China Daily 01/04/2012 page15)