For the past two years, “cross-border e-commerce” has been the buzz-phrase of the air freight and express industry. And it’s only natural that our industry would jump on it – no other mode of transportation is better suited to ensure expedited deliveries for parcels with origins far-removed from their final destination.
But, hype aside, what has actually changed? Who has done what to take advantage of, or meet the challenges of, the growth of cross-border e-commerce?
Much of the early maneuvering was hard to spot, but here are seven recent examples of the way e-commerce is reshaping air freight logistics.
From China to the world, and back
1: UPS and SF Holdings to establish JV
Last month, US-based express giant UPS and China-based SF Holdings (parent company of SF Express and SF Airlines) announced plans to enter into a joint venture, in which the two companies will use their respective assets and expertise to “collaborate to develop and provide international delivery services.” The venture (subject to regulatory approval) will initially focus on providing logistics services ex-China into the US, but will later expand to include other destinations. Cargo Facts expects that UPS will also take advantage of SF’s domestic network in China. For more, see UPS and SF Holdings to establish JV.
2: China Post to establish European HQ in Hanover
After discussions with the government of Lower Saxony in northwestern Germany, China Post has reportedly decided to establish its European headquarters at Hanover’s Langenhagen Airport. Beginning this summer, two freighter flights per week will carry mail and express parcels between Shanghai’s Pudong International Airport, and Hanover. Ultimately, China Post envisions three flights per day between the two cities, according to a report in Norddeutscher Rundfunk (for more, see China Post to establish European HQ in Hanover).
3: Amazon establishes direct mail port in Zhengzhou to sort and distribute orders processed in the United States
From a report in Xinhua, it appears that Amazon is utilizing scheduled cargo services from three US gateways (Los Angeles, Chicago and New York), to feed export orders into Zhengzhou. The first batch reportedly contained 568 orders weighing some 832 kg – not the biggest load ever flown across the Pacific, but a harbinger of things to come. Upon arrival at Zhengzhou’s Xinzheng International airport, the orders were processed through the airport’s e-commerce direct mail center within two hours, and were then handed off to Amazon’s local courier partner, WherExpress, for last-mile delivery. No information was provided about the carriers used, but we note that Cargolux operates direct flights twice-weekly from Chicago to Zhengzhou, while Yangtze River Airlines operates from Los Angeles to Zhengzhou.
4: HNA Group to establish air cargo hub in Xi’an
Last month, the 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 (YRA, formerly known as 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 making Xi’an the Group’s “One Belt, One Road” airfreight outpost.
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 (for more, see HNA to establish air cargo hub in Xi’an),
In fact, just hours ago as we publish this, Yangtze River Airlines reached an agreement with Atlas Air Worldwide Holdings, under which Atlas will operate a 747-400F for YRA in trans-Pacific service.
5: YTO Express acquires OTEL to use as springboard for international expansion
On 8 May, Shanghai-headquartered courier, YTO Express announced its intention to acquire a 61.87% stake in Hong Kong-based forwarder and logistics specialist, On Time Logistics (OTEL), and establish its international business headquarters in Hong Kong. The acquisition will support YTO’s efforts to go global by leveraging OTEL’s international business expertise, global network of 52 offices in 17 countries, and the advantages of incorporation in Hong Kong. With a framework for international expansion moving into place, YTO Express has hinted that its next steps will likely involve the acquisition of widebody aircraft by its airline subsidiary, Hangzhou-based YTO Express Airlines (for more, see YTO express acquires OTEL)
But if YTO wants to go global, it will require strong partnerships as well more freighters, which brings us to…
6: YTO launches Global Package Alliance
At the 2017 New Express Logistics Development Conference, held in Yiwu, Zhejiang, YTO Express announced that, as it pursues expansion beyond China, it will rely on partnerships to add connections in areas where it cannot sufficiently expand its network, either organically, or through acquisitions.
Although the move may appear as a sudden counter to the recently proposed jv between one of its top domestic competitors, SF Express, and UPS, the alliance has quietly been in the works since 2015. In April 2015, YTO sowed the seeds for the alliance when it invited potential partners to a “Global Package Alliance Summit”.
Without providing specifics regarding the alliance’s membership, the company says it has more than 50 courier and supply chain partners in 25 countries. YTO VP, Hao Wenning described the model of cooperation to business news sevice Caixin as a modern alternative to postal alliances like EMS. “It will become a common service provider for Chinese groups inside and outside China” he said. Unlike postal alliances, YTO says its Global Alliance will aggressively pursue the standardization of its cross-border deliveries.
And returning to the Chinese domestic market, we conclude with…
7: Alibaba will contribute to design and financing of one-million green delivery vans
Alibaba’s logistics affiliate, Cainiao announced a major partnership with two Chinese manufacturers to integrate “green-energy” electric delivery vans – of which one million units could be produced – into Cainiao’s IT logistics platform. To support the adoption of Cainiao-powered vehicles, Alibaba’s Ant Financial will also “provide financial support” of US$ 7.3 billion to “logistics firms and delivery drivers participating in the plan.” It is unclear if such financial support will come in the form of a loan, lease or subsidy, but at US$7,300 per vehicle, Alibaba’s investment is significant. Cainiao has long pursued an asset-light model in which it links thousands of fragmented logistics partners into a comprehensive network, and optimizes deliveries with data collected across its network. Recent pilot tests suggest that delivery vans equipped with Cainiao’s system can reduce travel distances by 30 percent, and could save the industry $1.45 billion per year.
Apart from HNA Group’s new Xi’an logistics venture, and Amazon’s Zhengzhou direct mail program, the majority of these new initiatives place little reliance on scheduled cargo carriers. If direct-mail models take-off on a larger scale, this could begin to change.