China will require 3,400 new airplanes worth around $340 billion over the next 20 years, according to Boeing's updated Current Market Outlook. With the continued high growth rate for China air travel and air cargo markets, China's fleet will nearly quadruple to 4,460 airplanes by the end of the forecast period, 2026. Chinese air carriers will add about 300 freighters by 2026, quadrupling the size of the all-cargo fleet. "China's domestic frequencies have increased more than 16-fold since 1990 while airplane sizes have remained about the same," said Randy Tinseth, vice president, marketing for Boeing Commercial Airplanes. "The Chinese domestic market's projected average growth is almost 9 percent." Elsewhere, things are looking up for Western-made aircraft. At the Air Cargo Europe conference this summer, Boeing said Russia will need 1,060 new mid-size and widebody jet aircraft over the next 20 years.

UPS and DHL both intend to add extra flights in the U.S. during the upcoming holiday peak season, and UPS will lease 10 Boeing 747s, as well as smaller aircraft to temporarily boost its fleet. UPS plans to wet-lease 32 extra aircraft, just a couple more than it had to lease for last year's holiday season. Included in the total are seven Boeing 747s from Evergreen, three 747s from Southern Air Transport, six DC-8s from Air Transport International and four 727-200s from Kalitta Air. Other leasing companies will also be involved. These aircraft will be used throughout the network, although most heavily on domestic U.S. routes. UPS plans to add 423 flights per day between Thanksgiving and Christmas (DAILY, Nov. 1). DHL -- which has a much smaller U.S. operation -- will require more than 425 extra flights spread over the Nov. 20 to Dec. 23 period. This will give it a cumulative total of about 8,000 flights in this fiveweek span. DHL contracts with ABX Air and Astar Air Cargo for its air operations in the U.S.

Analysis 2007, an annual report from Seattlebased aviation consulting firm Air Cargo Management Group (ACMG). "U.S. domestic air freight and express industry revenues reached $32.49 billion in 2006, a 3.8-percent increase over 2005 and a new record for the industry," reports Robert Dahl, ACMG project director. "Gains in 2006, split about equally between the express and non-express segments of the industry, resulted from rate increases implemented by express carriers and from fuel surcharge impacts," he adds. Traffic volume for the industry totaled 15.21 billion ton-miles, up only 0.5 percent year-over-year from 2005, while the number of domestic shipments moving through the major express networks - 6.7 million per day - decreased 1.3 percent versus 2005, the report finds. Many of the changes that have taken place recently in the domestic market can be traced to consolidation in the express area, according to ACMG. Airborne Express, for example, was acquired by DHL in 2003; UPS snatched up Menlo Worldwide Forwarding in 2004; and BAX Global became part of Deutsche Bahn/Schenker in 2005. Last year, however, was void of major acquisition deals in this sector. "No major developments of this type took place in 2006," Dahl notes, "but in the first half of 2007, DHL announced it is buying a stake in ASTAR Air Cargo, and ASTAR is attempting to acquire ABX Air. It remains to be seen how these moves, if consummated, will impact the industry." One element of the industry that has not been impacted is FedEx's position as the leader in the express market - in 2006, FedEx retained a 42.2-percent share of daily shipments. UPS came in a close second, with 37.5 percent of shipments, while DHL, which does not provide shipment count reports, is estimated to hold a 16.3- percent share. The integrated express companies as a group generated $29.09 billion, or 89.5%, of the industry's total revenue in 2006. Domestic freight handled by combination carriers and freight forwarders amounted to $3 billion - 9.2 percent of the total revenue amount - and domestic mail (exclusive of the major USPS-FedEx contract) represented $399 million, a mere 1.3 percent of the total. Partial-year results for 2007 indicate that this year is following the same pattern as 2005 and 2006, with positive financial results despite flat traffic levels. "High fuel prices, and the surcharges that result, continue to inhibit air cargo growth, and encourage shippers to look at less-expensive transportation alternatives now available in the form of expedited trucking services," notes Dahl. The U.S. market, however, remains the largest single air freight/express market in the world.

International air cargo rates will be under pressure in 2008 due to overcapacity in lift, particularly on the key China-U.S. route.
Freighters, from brand new triple 7s to ancient (by airline standards) 747-200s, will be taking to the skies in record numbers, making needed rate increases difficult to bestow or sustain. This is the prediction of Chris Coppersmith, President & CEO at Target Logistic Services, a Carson, CA-based logistics provider with domestic and international freight forwarding operations. "Before shippers congratulate themselves in benefiting from low rates, they should realize higher fuel and security surcharges are expected next year which will raise overall

transportation costs. With oil approaching $100 a barrel and new, onerous security regulations anticipated, fuel and security surcharges may actually run higher than actual shipping rates on a number of routes," stated Coppersmith. The Target executive noted that while air cargo volume between China and the U.S. will increase in 2008, "the number of aircraft serving this single most important air cargo route may increase even faster. New cargo airlines like Jade Cargo, Cargoitalia and Cargo B are rushing to offer service between China, the U.S. and Europe. Combined with increased capacity by the legacy carriers serving China, conditions may arise where too many airplanes are chasing too little cargo." Coppersmith sees a healthy trend accelerating in 2008 with shippers renewed interest in service. "Thoughtful shippers increasingly realize that low, noncompensatory rates are meaningless if cargo does not arrive on time, in good condition and with no hassles," stated the cargo veteran who has led Target since its founding 37 years ago. "The successful forwarder in '08 will be the one with the skill and experience to have customer cargo arrive at destination when promised despite changing lift conditions, onerous security restrictions and ground obstacles," affirmed Coppersmith. Domestic air cargo will continue to struggle in 2008, with either flat or declining volume," believes the Target chief. "The bankruptcy and recent liquidation of Kitty Hawk, a major domestic cargo airline, is another indication of the difficult status of domestic air freight," commented Coppersmith. "Target, like other forwarders, increasingly are turning to less expensive yet time definite surface transportation that fit into customers' production and distribution schedules," said Coppersmith. "We are fulfilling that need," he emphasized. Coppersmith also noted that air freight volume traditionally has been tied to the health of the U.S. economy. "Economic signals are mixed for the coming year," he averred. A number of economists is predicting a continuation of GDP growth at about 2 to 3 per cent. Others are expecting a 'mild' recession. If our economy continues to grow, I expect an increase in international air cargo volume at about the 4 per cent level. If our economy stops growing, air freight will be flat," Coppersmith concluded.