The trade war between China and the USA which was initiated by U.S. President Trump levy of extra taxes on Chinese goods coming into the USA, is heating up and could cause a serious disruption in global trade. China has imposed just as many new import taxes on U.S. goods and both sides are so far not showing any signs of wanting to de-escalate. In contrast, Trump has just imposed new tariffs on US$ 200 billion worth of Chinese imports.
Since China opened its doors some years ago, there has been an enormous growth in air traffic between China and the USA as well as China to Europe. Some of the Chinese carriers now flying
international routes were some years ago basically just regional airlines or did not exist at all.
The passenger traffic out of China has rocketed as well as the flow of goods by air.
Chinese freighter operators have set up daily all cargo routes on the Asia - Pacific route as well as to Europe. Huge sums have been invested in cargo fleets with the aim (at that time) of getting ready for the e-commerce boom, which although basically still in its infancy stage, is expected to grow at a tremendous pace in the coming five years.
Is this development now being endangered by the senseless trade war started by the U.S. administration? It’s not just the trade flow between China and the U.S. which is in danger, but also China to Europe and vice versa.
The Chinese government and also their aviation officials are putting on brave face at the present time. However, they must surely be having misgivings as to what will happen on the trade sector if no suitable agreement can be reached with Mr Trump.
Air China Cargo spin-off - the first sign?
The recent news that Air China aims to sell off their majority (51%) stay in Air China Cargo, came as a surprise to most in the industry. Admittedly, they plan to sell it to Capital Holding which is an affiliated company within the Air China Group.
But - is this move prompted by a fear from Air China that trade flows will down and that they will be left with too much cargo capacity which cannot be filled? It’s an interesting set-up that Air China Cargo is in. Cathay Pacific owns the remaining 49% and Capital Holding who plans to take over the 51% is a state-owned subsidiary of the China National Aviation Corporation (CNAHC), which in turns holds almost 54% of Air China.
From one pocket into the other - with some form of internal subsidy?
Air China Cargo will surely continue service even after a sellout. With Capital Holding as a new owner, the chance of selling off or leasing out unwanted capacity is much better for the carrier. Air China Cargo presently operates a fleet of four B777Fs, three B747Fs and four B757 freighters which are on lease to China Postal Airlines.
John Mc Donagh