A new express operator in China

A new challenger is entering the ring in the battle for express air freight in Asia, as ATSG and Okay Airways join forces with three other players to create United Star Express Airlines.

Last week we published an extensive analysis of Alibaba’s planned expansion from Chinese online shopping business to worldwide e-commerce giant, and the concomitant development of the Cainiao logistics network. Our thesis was that not only was Alibaba planning to become the same force in Europe and the Americas that it already is in China, but that it’s vision of an “open logistics network” had the potential to shake up the express industry. This week, we turn our attention to the way the air freight industry is reacting to this new challenge/opportunity.

In the Chinese city of Tianjin, on 24 September, five companies signed a Sino-American joint-venture agreement creating United Star Express Airlines. The new entity, registered in Tianjin’s free trade zone (Dongjiang Free Trade Port Zone), with registered capital of 400 million RMB (US$63 million), plans to commence flight operations in mid-2016.

The principal partners in the jv are US-based Air Transport Services Group (through a new subsidiary called ATSG West Limited); China-based Okay Airlines; and Vipshop Holdings Ltd, a China-based online retailer specializing in selling popular branded products at discounted prices. The other signatories are Tianjin Dongjiang Investment Company and Bridgewater Developments Ltd.

Initially, United Star will operate in China and nearby Asian countries, providing “third-party express and charter aircraft services to domestic and international express companies.”

As Cargo Facts has reported, express package volumes are growing at over 30% annually in China, and airlines are desperately adding capacity in an attempt to keep up. China Postal Airlines and SF Airlines are the obvious examples, adding 737, 757, and now 767 freighters, as fast as they can, but it is also important to remember that the big Chinese combination and passenger carriers are also expanding their narrowbody and widebody passenger fleets, and that this added belly capacity is also being filled by packages generated through online shopping.

The jv partners said that in its first year of operation, United Star Express “expects to have six small and midsize freighter aircraft, including Boeing 737, Boeing 757 and Boeing 767 aircraft.” The source of the aircraft was not specified, but since Okay Airways currently operates only one freighter (a 737-300F), we expect that ATSG will provide the 767 freighters (it has the world’s largest 767 freighter fleet). ATSG subsidiary Air Transport International has four 757-200Fs in its fleet, but these are currently in service to DHL Express, so unless the DHL contract is terminated, any 757 freighters operated by United Star would have to come from somewhere else. We shall see.

Looking ahead, the jv partners said the new company will gradually add “medium- and long-distance cross-border express and cargo charter services that cover Europe and the America regions.”

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