Speaking on the topic “Silk Road ¨C Alternative to TransSiberian Railway?” at the Transport Logistic China 2008 conference held in Shanghai recently, Sergey Stanovkin, director of DARS Consulting, said as there is talk of businesses considering sea-air movements for airfreight goods, so why not consider road and rail services between the two regions.
“In mid-September this year, we will start three trucking routes whose distance will be between 5,000-7,000 kilometres, just one quarter of the sea route from China to Europe,” said Igor Runov, director of IRU CIS InternationalRoad Transport Union.
Th e southern route will be between Kyrgyz Republic, Uzbekistan, Turkmenistan, Iran and Turkey, while the central route will cover Western China, Kyrgyz Republic, Uzbekistan, Turkmenistan, Azerbaijan, Georgia and European countries.
The northern route will be between China, Kazakhstan, Russia and European countries. Runov claims that trucking the cargo will take 10-12 days in summer and 15-16 days in winter, givinga highly competitive alternative to the present costly airfreight solutions inthe market.
Eleven new CASS operations were launched in 2007 according to IATA, which says they have reduced settlement costs by 47 per cent since 2003. In the next twelve months it plans to roll out CASS for exports in India, Taiwan, and Israel, and for imports in Australia and Singapore, while China will get a CASS settlement systems for domestic traffic.
Air capacity being cut
Against this scenario, shippers are seeing air capacity being cut due to escalating fuel costs. Finland’s national carrier Finnair said it is preparing to reduce its capacity by about two per cent initially due to the high cost of fuel and slowing demand. Finnair’s traffic figures for May, showed a lower traffic on scheduled flights, partly due to moderating demand for its flights to China and India, routes that have up to now spearheaded its growth strategy.
Chinese airlines also recently said they will cut overseas services to reduce losses as fuel prices soar. An employee of China Southern Airlines (CSA), who declined to be named, said the airline would cut all non-profi table flights.
At China Eastern Airlines, an official who also asked not to be identified, said long-haul services were unprofitable and would be slashed to cope with higher fuel prices. Where flights were retained, A330s would be substituted for Boeing 747s to reduce fuel consumption.
But, China Eastern still operates its recently started direct nonstop passenger and cargo flights from Sanya to Moscow on April 26 using Airbus A340-300 aircraft. The airline provides one flight every two weeks. Prior to this, there was only one Russian airline, Transaero, operating nonstop flights from Moscow to Sanya.
Separately, AirBridgeCargo Airlines (ABC), the scheduled cargo airline subsidiary of Russia’s Volga Dnepr group, launched non-stop services to Moscow from Shanghai and Hong Kong in April as well.
The airline, which has deployed the extended range Boeing 747 freighters for the service, claims to be the first carrier to ever connect Shanghai and Hong Kong with Moscow by scheduled freighter service. From Moscow, AirBridgeCargo offers onward connections to Amsterdam, Frankfurt and Luxembourg.
The Russian alternative
With airlines cutting back on capacity, cargo owners might look at the rail and road capacity offered by the Russians as an alternative, particularly if fuel prices continue to stay at the present high levels, Hong Kong Shippers Council director Sunny Ho said.
While, it may be too early to speak about the guarantees that Silk Road could provide as its construction would only be completed by 2020, the trucking alternatives to be started later this year might gain customers as trade between China and Europe increases.
Potential customers also include those shippers who are presently using integrators like DHL and UPS to ship their high value goods like perfumes which costs up to US$6 per kilo, rates that are very much higher than the airfreight costs three years ago.
