China's rapid economic development and its strategy to develop its vast western areas have created an enormous demand for cargo aircraft.

It is predicted that air cargo transport in China is expected to grow at an average annual rate of 16 to 18 per cent for the coming decades.

China's traditional air cargo transport, which usually relies on passenger planes, is no longer meeting the demand, said Cao Qing, head of the manufacturing division of the China Aviation Industry Corporation II (AVIC II).

"The industry needs specialized cargo transport fleets,'' Cao said.

In developed countries such as the United States, cargo is usually transported in second-hand planes, such as old Boeing aircraft, and specialized cargo planes such as the Lockheed C-130 Hercules.

Experts predict that China will add 20 to 30 cargo planes to its fleets within the next five years.

A few domestic airlines including China Southern have already created specialized cargo aircraft fleets. Some other airlines also have plans to organize specialized cargo fleets.

"If we do not seize this opportunity, foreign companies will step in to fill the niche,'' he said. "The country should provide more favourable policies for cargo aircraft development.''

Domestic airlines prefer leasing cargo aircraft rather than buying them, Cao said.

"The country should provide preferential loans for domestic airlines that plan to rent domestically-made planes,'' he said.

AVIC II is talking with the Ministry of Finance and other related government departments about the issue.

More than 2,000 cargo aircraft in operation internationally, including C-130s and Russian Antonov An-12s, will soon reach the end of their operational lifespan.

The removal of these aircraft, especially in Asian and African countries, will create a great opportunity for us to expand our market share, Cao said.

He said his company would try to expand its traditional market in Asia and explore new markets in Africa in the coming years.

AVIC II, the country's only cargo aircraft manufacture, said it will increase investment to develop state-of-the-art aircraft in the coming years to meet the surging demand.

Presently, AVIC II mainly produces two models of cargo aircraft -- the Yun-8 and Yun-12, Cao said.

Two separate companies, in Shaanxi and Harbin, under control of AVIC II, will participate in the upgrading of the two aircraft.

In 2001, the Shaanxi Aircraft Industry Group produced its first improved model of the Yun-8, the Y8F400, which has a maximum flight distance of 5,600 kilometres and is capable of carrying 20 tons of cargo.

The aircraft is equipped with advanced aero-electronics imported from the United States, which has helped reduce the required number of crew from five to three.

"AVIC II plans to invest about 400 million yuan (US$48 million) to further improve the Y8F400 by equipping it with new engines imported from Canada'' "We have already signed an agreement with Pratt & Whitney Canada to buy their aircraft engines,'' Cao said.

The new model, called the Y8F600, which is similar to the C-130 and the An-12, is scheduled to hit the skies in 2005.

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