Transportation Deployment Casebook/2023/Civilian freight in China

Introduction to Civilian freight
Air transportation has the advantages of speed and mobility and is an important way of modern passenger transportation, especially long-distance passenger transportation. It is also an indispensable mode of transportation for international trade, transportation of valuable goods, fresh cargoes and precision instruments. Air transportation has six characteristics: commodity, service, international, paramilitary, capital, technology and risk-intensive and natural monopoly.

Essential Technological Characteristic--Aircraft
Modern aircraft are mainly fixed-wing aircraft. The aircraft consists of wings, fuselage, flaps, spoilers, manoeuvring surfaces, tail assembly, landing gear and power plant.

Basic Technology
The aircraft wing mainly provides lift to keep the aircraft in the air. The power generated by the aircraft must be able to lift the full weight of the aircraft, which includes fuel, all passengers and cargo.

The fuselage of the aircraft is designed as a streamlined fuselage to reduce drag in flight.

The flaps are located on the trailing edge of the wings and are used mainly during the landing and take-off phases to increase lift while reducing airspeed.

Spoilers are used to disrupt the airflow over the wings, thereby quickly reducing the lift acting on the aircraft's wings.

Manoeuvring surfaces are used to control the aircraft's attitude and can be used to manoeuvre and control the aircraft's tail assembly.

The tail section has vertical and horizontal stabiliser surfaces which are used to provide stability to the aircraft.

The horizontal stabilisers prevent the aircraft from jerking up and down. The vertical stabiliser prevents the aircraft from oscillating from side to side.

The levelling tabs are generally fitted to the aileron surfaces and the rear of the rudder, and their function is to ensure that the aircraft is flown in a stable and balanced condition.

The landing gear supports the aircraft in the water or on the ground and at rest during landing and take-off.

The wheels of most aircraft are mounted on the shock-absorbing struts of the landing gear.

The engines and power units are located under the wings and provide the aircraft with the thrust to advance through the air.

Main Advantages
1. The speed of transport is high. Modern jet transport aircraft are generally in about 900 miles per hour, Concorde up to 1350 miles per hour. Air routes are not restricted by ground conditions, generally can fly in a straight line between two points, the range is much shorter than the ground, and the farther the distance, the more significant the advantages of fast.

2. Safety and accuracy. Air transport is safer, the rate of damage to the goods is low, to ensure the quality of transport, such as the use of air containers, it is more secure. Aircraft navigation has a certain schedule, can guarantee the arrival on time.

3. Simple procedures. Air transport in order to reflect its fast and convenient characteristics, for the shipper to provide a simple consignment procedures, but also by the freight forwarder to pick up the goods and for its all transport procedures.

4. save packaging, insurance, interest and storage costs. Due to the speed of air transport, goods in transit time is short, the cycle is fast, the inventory can be relatively reduced, the funds can be quickly recovered.

Main Markets
The main markets can be considered in several ways:

1. There are a considerable number of intercontinental markets in international trade today, where competition for goods is fierce, market conditions are rapidly changing and time is efficiency. Air cargo transportation has the characteristics of faster than other modes of transport, can make the import and export of goods can grab the market, sell at a good price, enhance the competitiveness of goods, the development of international trade has played a great role in promoting.

2. Air cargo transportation is suitable for the transportation of fresh and perishable and seasonal commodities. These commodities have very high requirements for time, and if the transport time is too long, the commodities may become waste products and cannot be supplied to the market; seasonal commodities and emergency goods must be transported to the market to fight for time, otherwise they will become stagnant commodities. The use of air transport, can keep fresh and alive, but also conducive to opening up the long-distance market.

3. The use of aircraft transportation like computers, precision instruments, electronic products, complete sets of equipment in the precision part, precious and rare metals, watches, photographic equipment, textiles, clothing, silk, leather products, Chinese and Western medicine, handicrafts and other high-value goods, to adapt to the characteristics of the rapid changes in the market. The advantages of speed, safety and accuracy can be used to make up for the high freight costs.

4. Air transport is an important part of international multimodal transport. In order to give full play to the special characteristics of air transport, in places that cannot be reached directly by air transport, can also be used in the form of joint transport, such as common land-air intermodal transport, sea-air intermodal transport, land-air-land intermodal transport, and even land-sea-air intermodal transport, with other modes of transport, so that various modes of transport show their strengths and complement each other.

Before the advent of air freight
Before the advent of air freight, the three main modes of transport were generally by road, rail and water. And these three modes of transport had limitations.

1.Physical space and geographical limitations in road transport

2.High cost of money and time for water transport

3.The instability, insecurity and untimeliness of rail and road transport

The Scene Before The Modes
Before the First World War, the world was dominated by road transport. Among these were trams, which were popular. But since the invention of the aeroplane, public curiosity and exploration of other countries has increased. It was discovered that both road transport and rail transport were less fast and carried less volume compared to aircraft. After the First World War, economies and trade between countries became more frequent. In order to explore new markets and develop local economies more quickly, people also began to explore air transport.

The quest for faster transport, lower transport costs and more efficient, safe and comfortable transport has led to interest in new possibilities for air transport.

TCAS (Traffic Collision Avoidance System)
The TCAS plays an important role in ensuring flight safety. TCAS is able to predict future hazards and alert pilots to avoid them by detecting conflicts with aircraft in the vicinity.

The aviation industry began working on airborne collision avoidance systems as early as the 1950s, but their application was not widespread due to technical problems. It was not until the 1980s, after many air crashes, that the first generation of air collision avoidance systems were developed. The TCAS I system operates by using a transponder on the aircraft to determine the aircraft's heading and altitude so that the aircraft can display the distance and altitude between each other.

Autopilot system
An autopilot is a device that automatically controls the aircraft according to certain technical requirements. It is used in manned aircraft to relieve the pilot of the burden of flying the aircraft automatically at a certain attitude, heading, altitude and Mach number.

Civil Aviation Law of the People's Republic of China
It is a law enacted by China to safeguard the country's airspace sovereignty and civil aviation rights, to guarantee the safe and orderly conduct of civil aviation activities, to protect the legitimate rights and interests of all parties involved in civil aviation activities, and to promote the development of civil aviation.

Rules for the Domestic Carriage of Goods by Civil Aviation of China
were formulated in accordance with the Civil Aviation Law of the People's Republic of China in order to strengthen the management of air cargo transportation and maintain the normal order of air transportation.

Early Market Development
On November 2, 1949, the Political Bureau of the Central Committee of the Communist Party of China decided to establish a Civil Aviation Bureau under the People's Revolutionary Military Committee, under the guidance of the Air Force. 1950, when the new Chinese civil aviation was first established, there were only 30 small aircraft, with an annual passenger traffic of only 10,000 people and a total transport turnover of only 1.57 million tons of kilometres.

The initial market niche was based on military control in a state of war, giving priority to the transport of goods for the military. The cargoes were mostly military or emergency supplies. After the end of the war, the military gradually reduced the use of civilian airports and civilian passenger aircraft, thus gradually shifting this segment to civilian cargo.

Functional enhancement is more of a role in maintaining stability and improving the effectiveness of all aspects of transport; functional discovery plays a role in progressive development, combined with policy to continuously innovate the route forward.

Policy in the 'Birth Phase'
Strategic Decision: China resumed participation in ICAO activities in 1974. In 1978, the Third Plenary Session of the Eleventh Central Committee made the strategic decision to "shift the focus of the Party's work and the nation's attention to socialist modernisation", ushering in a new period of development for China's socialist cause. In order to meet the requirements of this new situation, China's civil aviation management system underwent a fundamental reform and a period of rapid development of China's air transport industry began.

On February 14, 1980, Deng Xiaoping pointed out that "civil aviation must be enterprise". On March 5 of the same year, the Chinese government decided to separate civil aviation from the military establishment, and changed the Civil Aviation Administration of China from being subordinate to the Air Force to being an agency directly under the State Council, with enterprise management.

In March 1980, China's civil aviation was separated from the military establishment and the government and enterprises were separated, taking the path of enterprise.

In 1987, the Chinese government decided to reform the civil aviation industry with a system characterised by the separation of airlines and airports. Six national backbone airlines, namely Air China, China Eastern Airlines, China Southern Airlines, China Southwest Airlines, China Northwest Airlines and China Northern Airlines, were established to operate independently, be self-financing and compete on an equal footing.

The policy and strategy re-birth phase is more of a protective role. Backed by the state and the industry as a whole to promote air cargo development.

The development of freight in China is mostly based on the more mature policies of the United States, and combined with China's own development, so as to conclude the development of policies suitable for China's freight. When the operation of this mode of transport is stable, the development of areas suitable for the development of air cargo, and seek to cooperate with other countries to learn from each other to complement each other.

Some of the policies that will help the development of air cargo in China are as follows：

Tax incentives: The Chinese government has implemented a number of tax incentives for air cargo companies.

Easing market access: As most Chinese freight is international, seeking cooperation is best combined with private and state-owned capital. China has gradually relaxed access restrictions on foreign-owned air cargo companies and encouraged domestic and foreign air cargo companies to compete in China's air cargo market.

Strengthening international cooperation: The Chinese government is actively promoting cooperation with international air cargo companies to facilitate the international development of Chinese air cargo companies.

Improving air cargo technology: China has increased its investment in air cargo technology research and development to promote technological innovation and improve the efficiency and quality of air cargo.

Growth Phase
With WTO accession, an air service agreement was signed between the US and China in 1999, which calls for an increase in the number of flights between the two sides to 54 flights per week, including 37 passenger and 17 cargo flights, by 2004. In 2007, a more liberalised agreement was drafted to increase the number of scheduled weekly flights to 249 from 2010, with 121 passenger and 128 cargo flights.

Private
The Chinese government has started to allow foreign participation in state-owned airlines at a much higher rate. Prior to 2002, foreign equity participation was restricted in policy to a maximum of 49%, and in practice most foreign investors at that time had a participation of around 30%.

The role of the private sector (business) is primarily to actually run the air cargo business. They have the experience and expertise to provide an efficient and professional service, and are also the main drivers of innovation and technological progress. They are able to continuously optimise operational processes, improve service quality and customer experience, and enhance business profitability.

Public
In 2008, the Civil Aviation Administration of China (CAAC) issued "Ten Measures to Promote the Stable and Rapid Development of the Industry in Response to the International Financial Crisis", which proposed to "expedite the approval of eligible cargo airlines and branches that have applied for and All airlines have to be approved before they can be listed and established.

The role of the public sector (government) is mainly to provide support in terms of infrastructure development, policy development and regulation.

Policy
Another important concession is that the Chinese government has begun to allow foreign participation in state-owned airlines at a greater rate.

In early 2004, the Civil Aviation Administration of China (CAAC) promulgated the "Opinions on Several Policies and Measures to Accelerate the Development of Domestic Air Cargo", which proposed to "liberalise access to the domestic air cargo market", i.e. to encourage the development of all-cargo airline enterprises, and to encourage the construction of cargo hubs at airports in Tianjin, Shanghai, Guangzhou, Shenzhen, Wuhan, Kunming, etc., after which cargo The rapid development of the airline industry was followed. More private cargo companies started flying between 2004 and 2008.

There are still a number of policy issues in the Chinese air cargo industry, mainly including the following：

Inadequate regulation of the industry: There are still shortcomings in the regulation of the industry, with safety hazards being particularly prominent.

Inadequate infrastructure construction: Inadequate infrastructure construction in some air cargo airports and air logistics parks has led to low freight efficiency and difficulties in meeting market demand.

Lack of standardisation and informatisation: The lack of a standardised and informative transport service management system has led to opaque information and inefficient transport in the air cargo market, making it difficult to achieve efficient management.

To address these issues, industry regulation should be strengthened, investment in civil aviation-related infrastructure should be increased, and standardisation and information technology should be continuously promoted.

During this period, the policy environment was favourable for air cargo development, with government support and policy incentives providing a better market environment and more opportunities for businesses to grow.

Mature Phase
Following the global financial crisis in 2008, the economic slowdown or recession led to a reduction in demand for cargo, which in turn led to significant changes in the market. At the same time, traditional all-cargo airline companies were forced to cease operations, restructure or transform their development, but individual companies are still seeking a way out. The opportunity to redevelop in 2016, the Civil Aviation Administration of China issued a "notice on strengthening the market access management of new airlines", proposed "to support investors to set up all-cargo airlines, to carry out cargo market, improve the cargo route network, and promote the development of air cargo", which brings new development for China's cargo airline enterprises. This brings new opportunities for the development of Chinese cargo airlines.

During the development of China's air cargo industry, attempts are constantly being made to adjust the air cargo market, competitive conditions and policy values in three areas.

1.On the market side, air cargo companies need to adjust to market demand. For example, opening up new routes and increasing cargo capacity to meet market demand.

2.In terms of competitive conditions, air cargo companies need to continuously improve their competitiveness in order to maintain their dominant position in the market.

3.In terms of policy values, air cargo companies need to pay attention to policy changes and adjustments in order to cope with the good or bad effects of policies.

Opportunity to “Re-invent” the mode
Digitisation: Air cargo companies can improve efficiency and reduce costs by increasing the digitisation of their systems and processes.

Green development: Air cargo companies can adopt environmentally friendly technologies, such as the use of low carbon fuels, to reduce carbon emissions and environmental pollution and achieve sustainable development.

Quantitative Analysis
According to the statistics of the National Bureau of Statistics of China for the past years, the data is:

$${\displaystyle S(t)=S_{max}/[1+exp(-b(t-t_{i}))]}$$

In this formula:


 * $$S(t)$$ is the status measure (Air freight volume (million tons))
 * $$t$$ is time (usually in years)
 * $$t_i$$ is the inflection time (year in which is achieved)


 * $$S_{max}$$ is saturation status level
 * $$b$$ is a coefficient

Estimate $$S_{max}$$ and $$b$$ were made using the following formula: $$Y=bX+c$$

In this formula:

$$Y=\ln(Passenger/(K-Passenger))$$

$$X=Year$$

The projections are relatively appropriate. The square of R in the forecast estimates is relatively close to 1. Although there are several clear signs of growth and decline over the 47 years of the statistics, they do not affect the overall estimated forecast and the final forecast is similar (leaving aside the decline in the 2020 data due to exceptional reasons).

As can be seen from the graphs formed by the data, from 1974 to 2005 there was a relatively even and steady rise, which I consider to be the birth period of China's air cargo; then, from 2005 to 2012, there were a number of fluctuations, which I consider to be the "pain period" that must be experienced during the growth phase After that, from 2012 to 2019, the figures continue to rise again, indicating that the industry has reached a mature stage, so I consider this period to be a period of maturity and growth for China's air cargo; and finally, the figures for 2020, when the industry is in recession for some specific reasons, are predicted to grow until the industry picks up after this year It will be difficult to return to the previous state and the figures will hardly rise compared to those before 2020.

This suggests that China's air freight will be severely affected by the environment, especially the adverse effects.