YTO Cargo Airlines looks beyond scheduled freighter services

Earlier this week, Hangzhou-based YTO Cargo Airlines opened a cargo sales office in downtown Shanghai, a move that seems to reflect a departure away from a business model previously reliant on providing lift for its parent company, YTO Express.

Although “the majority of its capacity” will continue to serve YTO Express, the airline subsidiary is increasing its efforts to market excess capacity on scheduled freighter flights, and in addition, will offer “charter and long-term ACMI Solutions to external partners,” according to a source familiar with the plans.

YTO Cargo Airlines’ fleet currently consists of seven 737-300Fs and two 757-200PCFs, all of which operate in scheduled services to the nine domestic and international cities in YTO’s air network. Given that much of the carrier’s freighter fleet (like the fleets of other Chinese express carriers) sits idle during the day, it is not an unusual step for the airline to market charter or ACMI services for when the aircraft are not in use.

The move also supports claims that there is excess domestic lift available in China. In November 2017, we reported that the rate of growth for domestic freighter fleets in China is likely to slow as alternatives to maindeck lift such as bellyspace, trucking, and rail options increase, and as e-commerce fulfillment models continue to become more efficient. David Su, Chairman, YTO Cargo Airlines has also acknowledged that the most promising opportunities for express freighter operations are related to international cross-border flights where few modes of transportation can match the speed and efficiency of air lift.

YTO’s strategy for leveraging the growing demand for international air freight lift involves the launch of a new cargo airline startup, that is part of a joint venture with the Western Airport Group, the operator of Xi’an Xianyang Airport (XIY), where the airline will be based. China Northwest International Cargo Airlines, as the airline will be called, could play a crucial role for Xi’an as it angles to become a logistics gateway for cargo traffic moving between China and Central Asia.

Looking ahead, YTO’s planned fleet additions for the remainder of 2018 seem to support a desire to go global. The airline says it will add three 757-200PCFs in the next six months but does not expect to add any additional narrowbody freighters during this period. Further afield, we note that although no delivery dates have been confirmed, YTO is also a launch customer for the 737-800BCF. Depending on when YTO takes redelivery of these aircraft, the -800BCFs could either be used to add capacity or replace -300Fs as they are transferred to the new startup airline’s fleet. YTO has previously said that the Xi’an-based startup airline will launch with three 737-300Fs from its sister airline.