Asian express market heats up with a new Chinese domestic cargo carrier

YTO Express is the latest Chinese express provider to receive approval to launch a domestic cargo carrier. According to the publication, Air Transport World, the cargo airline is expected to be based at Hangzhou Xiaoshan International Airport and will initially operate either Boeing 737-300 or 737-400 freighters on domestic routes. The company further plans to expand its fleet to 15 Boeing freighters in the next three years while investing CNY5.5bn to its cargo entity over the next 10 years. Also, in the past two years, it has established partnerships with Air China Ltd and China Eastern Airlines Corp Ltd under which it will use their warehouse facilities in order to expand services further across China.

However, it still trails the domestic leader, SF Express, which currently operates 15 freighters from its base in Shenzhen Bao’an International Airport. SF Express also leases 19 freighters and plans to buy another 11 aircraft by the end of 2015. Meanwhile, China Post has 18 B737 freighters which are mostly leased. China Post’s airline network covers not only China but Japan, South Korea, and Taiwan, with Nanjing, Shanghai and Wuhan as hub centers.

There is plenty of room in China’s domestic air market. According to the Civil Aviation Administration’s 12th five-year plan, the air freight volume in China could reach 9m metric tons in 2015. SF Express, for example, moved about 445,000 metric tons of air freight in 2011 and 600,000 metric tons in 2012.

Much of this growth is due to Alibaba’s influence on the Chinese express market which, according to the company, accounts for over 60% of the parcels moved in China. YTO Express, SF Express and China Post are among Alibaba’s partners in its country-wide logistics network. However, while there are great opportunities in the Chinese domestic market, there are even greater opportunities cross-border as evident from Alibaba’s recent investment in Singapore Post.

SF Express expanded its Asian reach in 2013 with outbound services to Thailand and Vietnam. In 2014, Australia was added.

YTO Express is also reaching across the border. In April, it signed a preliminary deal for business cooperation with South Korea’s CJ Korea Express to share delivery networks and jointly develop a system for delivery of online-traded merchandise.

As YTO Express begins its domestic cargo service, it is likely it will follow SF Express and expand its delivery service across the Chinese border while maintaining partnerships with companies such as CJ Korea Express. The intra-Asia express market will continue to grow adding additional competition for the likes of FedEx, DHL, TNT and UPS.

For more information on the express market you can read Ti’s Global Express and Small Parcels 2014 report. To purchase the report contact Holly Francis or for more information download the brochure.