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Will the Silk Road take to the skies in 2018?

Charles Kauffman by Charles Kauffman
December 27, 2017
in Carriers, News Archives
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HNA Modern Logistics affiliate airlines continue to expand their presence in Xi’an.

As 2017 nears an end, it will go down in the history books as the most robust year for global air cargo demand growth in at least a decade. But it could have been even better. Particularly in China, where well-capitalized start-up all-cargo carriers eagerly await the green light light from the Civil Aviation Administration of China (CAAC) to acquire freighters, and commence operations.

Most of the proposed startup airlines are headquartered in West-Central China, and aim to support the Chinese government’s ambitious ‘Belt and Road’ initiative by providing air logistics support along the ancient Silk Road. But even though numerous parties have shown an interest in establishing new ‘Belt and Road’ carriers, the CAAC had until recently stalled on issuing any new Air Operator’s Certificates. However, with the launch of Longhao Airlines and China Cargo Air Carrier Corp, there are signs that new AOCs could be granted next year.

The case for new start-up cargo airlines based in China’s interior is simple: it is argued that air cargo facilitates trade and economic growth for a region that has in recent years been lagging China’s more prosperous east coast. In contrast to start-up airlines in other parts of the world, ‘Belt and Road’ carriers are not focused solely on profiting from the cargo they haul, but also the opportunities they can deliver by injecting affordable airfreight capacity into the market. With this objective, the formation of new airlines with deep roots in the region are favored over trying to lure existing carriers to open up new routes.

Looking ahead into next year, there are three promising start-ups which could elevate the Silk Road into the sky as early as 2018.

The oldest is Ningxia Cargo Airlines, which received preliminary approval from the CAAC to conduct operations from its base at Yinchuan Hedong Airport (INC) in the Ningxia Autonomous Region, 900 km west of Beijing back in June 2015. Originally, Ningxia Cargo Airlines had plans to acquire three 737-300Fs from Zhejiang Loong Airlines (formerly CDI Cargo), which planned to exit the cargo business altogether in favor of the passenger market. A delay in Ningxia’s AOC prompted Loong to postpone its exit from the cargo business, and even today, the carrier continues to operate its three freighters.

Ningxia Cargo Airlines meanwhile, recently told Cargo Facts that it now expects to receive its AOC by June 2018, and commence operations in 3Q18 with a 737-300F it has purchased. Once flights begin, Ningxia hopes to immediately begin adding additional freighters and build a “Silk Road to the sky” that will provide greater access to the landlocked territory.

According to an internal planning document seen by Cargo Facts, Ningxia will be majority-owned by the Shaanxi provincial government’s Xi’an Aviation Industry Development Co., Ltd., which holds a 99% stake in the company. The remaining 1% is owned by Shaanxi International Freight Air Transport Co., Ltd.

The Shaanxi Provincial government is also extremely active within its own province, where it has managed to lure two new start-ups to the province’s capital city, Xi’an. In March, YTO Express Airlines outlined plans to establish a new joint-venture cargo airline in Xi’an. The launch of Northwest International Cargo Airlines (as the airline will likely be known in English) is part of a broader blueprint to make Xi’an into a multimodal logistics hub, and will coincide with the construction of a new YTO Express sortation center.

David Su, Chairman of YTO Airlines and Northwest International Cargo Airlines recently told Cargo Facts that the start-up’s application has already received preliminary approval, and is now on the desk of CAAC headquarters in Beijing. Approval is expected in 2018, at which point the carrier will begin operations with a fleet of 737-300Fs, sourced from YTO Airlines’ existing fleet. After 1-to-3 years of successful operations, Su imagines the carrier will start acquiring widebody freighters, and will shift its focus to long-haul international service from its base in Xi’an.

For YTO Airlines, the launch of a new affiliate airline, and the establishment of a second air cargo hub is just as much about supporting the Belt and Road initiative as it is about seizing future market opportunities. “You cannot say that for a country as large China, there will only be two hubs, Beijing and Shanghai. China’s economy is so huge, it will warrant hubs in all regions of the country. Since the CAAC will not allow us to fly into Shanghai, we’re planning early to seize opportunities in the West.”

Speaking on the cooperation between YTO Airlines and Northwest International Cargo Airlines, Su said that initially YTO would provide a significant level of guidance before loosening the reigns. Eventually, the carrier will grow independently of YTO, and focus on both express and general cargo market opportunities.

Northwest International Cargo Airlines is unlikely to be the only cargo carrier based at Xi’an, as the region has also attracted interest from the HNA Group. In May, the Hainan Group established a new subsidiary in the north-central city of Xi’an. HNA Modern Logistics Group, as the new company is called, is focused on developing Xi’an into a global airfreight hub, a “Chinese Memphis” as the company’s CEO, Zhang Weiliang has described it.

HNA is committed to expanding the fleets of its existing cargo carriers, which likely means it intends to boost the number of flights operated by its affiliate carriers (Tianjin Cargo Airlines, Suparna, Hong Kong Airlines and MyCargo Airlines) at Xi’an. The Group has also proposed expanding the scope of its passenger affiliate airline, Air Chang’an with the addition of freighter aircraft, or a new a spin-off cargo airline.

How many carriers will launch, and how fast will their freighter fleets grow? Time will tell. Those interested in learning more about China’s rapidly growing air cargo carriers are invited to join us next year in Shanghai for Cargo Facts Asia. The event will be held 23-25 April at the Mandarin Oriental Pudong and will feature speakers from SF Airlines, YTO Airlines, the HNA Group, and many more. For more information, or to register, visit www.cargofactsasia.com

Tags: Aircraft FleetAsia-Pacific CargoExpress Air Cargofreighter aircraftFreighter conversionHNA GroupSF ExpressTianjin Cargo AirlinesYTO Cargo Airlines
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