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.

With YTO’s domestic network now quite developed, Alibaba-backed YTO Express has been eager to expand along the “One Belt, One Road” path between Asia and Europe. Earlier this year YTO Express went public, and outlined plans to make the north-central city of Xi’an a bridgehead for parcels moving into Central Asia and Europe with a new hub at Xianyang Airport (XIY). At the same time, the company’s airline subsidiary, YTO Express Airlines, 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 (see YTO goes west with new jv airline and hub, for more). Hong Kong in turn, will serve as YTO’s international command center. Alibaba has promoted its “global buy, global sell” strategy, and YTO is now following in the e-tailer’s footsteps with “global transport”.

Commenting on the OTEL acquisition, Hao Wenning, vice president of YTO Express blatantly said that as YTO grows beyond mainland China, “one of the major costs will come from buying aircrafts to strengthen air freight services.” If that is true, it appears YTO Express expects to build a substantial widebody fleet.

Alibaba’s logistics platform Cainiao, has long bemoaned the lack of international air freight capacity available to satisfy rapidly growing cross-border e-commerce. Given Alibaba is YTO’s largest shareholder, the express company’s internationalization plans are of particular interest. Moreover, Cargo Facts has run across rumors that Cainiao is considering major changes to how it integrates partners into its platform, and may choose to exercise more direct control. But just how deep and interconnected are Cainiao and YTO Express’ internationalization plans?

Either way, data from Cainiao will likely factor into future freighter fleet decisions. Which freighters YTO’s airline acquires will depend on the volumes it needs to carry, how much it is willing to spend, and how long it can afford to wait. The most obvious candidate is the 777F production freighter which is popular with express companies for its range and volume. That being said, it remains to be seen if YTO Express will approve the purchase of new-build freighters. If conversions are in the cards, YTO Express could opt for freighter-converted A330Fs.