Reform & Innovation ， Seeking New Opportunities for Air Cargo in China CATA Market Research Dept. QingYu Zhu March

1. Reform & Innovation，Seeking New Opportunities for Air Cargo in ChinaCATA Market Research Dept. QingYu ZhuMarch 26, 2008

2. 1. Pride & Discouragement The Share of International Cargo： CivilAviation Transport Size： No. 2 70% 60% 30% 20% No. 37 80s 2006 1978 2007

3. CivilAviation Is The Earliest Industry Entering The Internationalized Market ①1960s-1970s,linked up international market.-- “Indirectthrough traffic, avoid to contact”②End of 1970s, international airline act as“the general agent for each other”.-- “ Political Equity, Economical Alliance” ③Middle of 1990s，the“ general agent for each other” ended.——“Equal traffic rights, liberalized operation”④2001-present, opening of “International Integrated Market”——“competing at different levels”

4. 2. Status, Problems, and Bemusement(1) Compost of Conflict in Domestic and International Market ？ International Market Commercial service Domestic Market public service？

5. (2) Emphasizing Market Competition In Excess Enterprises Forget the Promise and Obligation of Public Service Gradually Seeking for Enterprise’s Profit Target Maximization

6. (3) Short-Sighted Benefit of Public Resource Local airports only aim at attracting investment, improving management and service, and if carrying out the policy for investors to use airport’s public resource exclusively, it would affect the publicity and fairness of public resource usage.

7. (4) Rough Industry Data Information Emphasize production and scale, ignore industry chain connection; Emphasize internal capital and main product, ignore commercial market information; Rough data information.

8. (5) Shortage of Commercial Navigation Agreement Mutual Exemption of Tax “Mutual Exemption of Tax” term，making the different airways in home and abroad be actually at an unequal status in the same market.

9. (6) Competition Gap Domestic Airways： Foreign Airways： Competition Lone “air” cargo company Aviation and surface“integrated industry chain”

10. Foreign Airways： Value Added Airways Storage Distribu-tion Dispatch Agent Express Mode of Competition Logistics Traffic Integrated Industry Chain Loss ？

11. 3. Development and Review Expand air service agreement Code share Loosen foreign capital access IATA access to domestic market Open 5th traffic rights Lift general agent agreement State ebb and private flow Introduce local investment Financing and IPO Separation of primary and secondary subject Transform into join-stock enterprise separation of military and civil Separate governmental functions from enterprise management Assets reconstruction Simply examination and approval Modern enterprise system Give airport to local department Attend IATA, set up HK office Aviation alliance 1979 1985 1987 1991 1994 1997 2001 2003 2005 2007

12. 4. Reform, Innovation and Countermeasure （1）Know About Aviation Market Domestic aviation market Simple domestic market ——Domestic airline Domestic trade ——international airline market + = （traditionally, its impact on domestic market is ignored.）

13. Traditional view： International Market in home reference International Market abroad 国内 市场 Result in Domestic market reference Market confusion Independent innovation： International Market in home International Market abroad Domestic market reference reference Competition strength innovation

14. （2）Realize Two Market Strategies In Home and Abroad international market Maximize commercial benefit Maximize public benefit domestic market Bottom line Target

15. （3）Enterprise (industry) Target In line With The Target of “public benefit maximization” Weakening competitiveness Enhancing competitiveness Public benefit Public benefit Enterprise benefit Enterprise benefit Red ocean Blue ocean

16. （4）Design Ordered Domestic Market Environment Market access + Enterprise promise Market operation + Regulation constrain Free competition + Market regime + = Legislation guarantee

17. （5）Enhance The Public Service Function of Airport CargoMaintain The Equality And Fairness of Domestic Public Market Case：HK International Airport Terminal and Other Commercial FacilityTake the promised optimal public service benefit as the principle 1、investor satisfaction 2、customer satisfaction 3、public satisfaction 4、supervisor satisfaction

18. （6）Establish A Domestic Cargo Market Information Platform1. Airport cargo operating data information2. The 3rd Cargo party trading information platform (domestic neutral cargo order） Information is productivity and competitiveness. —— Guaranteed by market regime effectively

19. （7）Care About The NegotiationMostly care about the international market negotiation from marketing and economics.At the age of economic globalization, the market victory or defeat depends on the negotiation between governments.——《The World Is Flat》 Author: Thomas L. Friedman

20. 5. The “Integration” Opportunity of the International Aviation Market More convenient traffic; More efficient service； More advanced technology；broader market； More monopolized capital；Stronger power status.

21. At the age of economic globalization and international aviation market integration, the target is easy to set up, but the recognition, path and method is not easy to grasp. China air cargo is at the critical developing time, and we should rely on domestic market to construct “blue ocean” market, in order to reform and innovate, free ourselves out of trouble and meet these challenges from the international air cargo market. Conclusion：

22. THANK YOU！