HNA Group envisions Xi’an as future “Chinese Memphis”

If you read this headline, and thought “wait a minute, isn’t Shenzhen-based SF Express Airlines already planning a ‘Chinese Memphis’ in Ezhou,” you are not mistaken. Perhaps China has room for two Memphis-like hubs, or at least a Memphis and a “Chinese Louisville”. Either way, last week Hainan Group established a new subsidiary in the north-central city of Xi’an. HNA Modern Logistics Group, as the company will be called, will focus on developing Xi’an into a global airfreight hub, a “Chinese Memphis” as the company’s CEO, Zhang Weiliang describes it.

HNA’s largest cargo airline, Shanghai-based Yangtze River Airlines (formerly Yangtze River Express) quietly began piloting scheduled services to Xi’an in April with added stops to its Shanghai – Amsterdam and Shanghai – Chicago flights, which utilize YRA’s 747-400Fs. The carrier will now make the Shanghai – Xi’an – Amsterdam and Xi’an – Shanghai – Anchorage – Chicago routings permanent—the first pivot towards a making Xi’an the Group’s “One Belt, One Road” airfreight outpost.

The HNA Group’s rationale for establishing a new subsidiary (HNA Modern Logistics), rather than just adding new YRA flights is likely two-fold: First that the company may have been able to take advantage of subsidies or preferential policies related to the “One Belt, One Road” initiative for establishing a new company, and investing in Xi’an. Second, and more importantly however, it means that other HNA Group Airlines will likely serve the hub. In the past HNA has mentioned other potential cargo airline startups to complement YRA and Hong Kong-based Hong Kong Air Cargo (previously a division of HNA-controlled Hong Kong Airlines).

According to local media reports, Xi’an will become HNA Modern Logistics’ international gateway for both long-haul flights utilizing 747/777Fs, and regional flights operating 737/767 and A330Fs. Doing so will require HNA Group airlines to acquire additional freighters. At present, no HNA Group affiliate airline operates 767Fs or 777FS. An order for 777Fs however, has been in the works for years.

In June 2011, Hong Kong Airlines placed an order with Boeing for six 777Fs. This order was later transferred to an HNA Group leasing affiliate, Hong Kong International Aviation, and later deferred. Given these 777Fs are still on firm order with Boeing, some of them could end up in Hong Kong Air Cargo’s fleet, or YRA’s. Hong Kong Air Cargo has previously said it plans to scale-up its freighter fleet into “double-digit” figures within five years, from its current five A330 freighters. Nonetheless, nothing would preclude some of Hong Kong Air Cargo’s future fleet from operating out of Xi’an.

One thing that remains to be seen, is how YRA will treat its Shanghai Pudong hub moving forward. HNA Modern Logistics has suggested that Xi’an will handle both general freight, and express cargo – commodities including electronics, semiconductors, perishables, pharmaceuticals and express mail. As Xi’an develops, YRA may choose to shift express-focused flights to Xi’an, while focusing on passenger operations in Shanghai.

HNA is not the only company eyeing Xi’an as an air freight hub. China Cargo Airlines has recently launched flights to Amsterdam, following a migration to Xi’an by its former parent China Eastern Airlines. Additionally, YTO Express Airlines recently signed a memorandum of understanding with Western Airport Group to establish a joint-venture airline in Xi’an under the name China Northwest International Cargo Airlines.