China Post and Lufthansa Cargo align to target cross-border e-commerce

On 19 November, China Post and Lufthansa Cargo entered into a “Joint Freight Operation” agreement, under which China’s National Post will leverage capacity on Lufthansa Cargo flights to improve e-commerce-driven air mail transportation between China and Europe. Initially, Lufthansa Cargo will provide the Post with cargo capacity between Shanghai and Frankfurt that is “equivalent” to a weekly 777F flight.

Rather than operating a 777F solely on China Post’s behalf, the deal will likely resemble a block space agreement, in which China Post will have regular access to Lufthansa’s scheduled cargo and passenger flights. According to the most recently published winter schedule, Lufthansa Cargo operates ten weekly 777F flights between Shanghai (PVG) and Frankfurt (FRA).  In addition to the freighter flight, Lufthansa operates at least eighteen weekly widebody passenger flights out of the Yangtze River Delta gateway.

Although Lufthansa Cargo has long provided lift to China Post on outbound flights from key destinations in China, such as Beijing and Guangzhou, following the new agreement, there are signs the scope of their cooperation could grow. The two companies say they are jointly exploring the development of other international routes.

Just a few years ago, it seemed plausible that China Post’s airline subsidiary, China Postal Airlines, would consider expanding its international freighter capabilities – but cooperation with airlines like Lufthansa Cargo could be an indicator of an alternative strategy. In May 2012, China Postal Airlines operated the country’s largest express fleet with twenty-two narrowbody freighters and its parent, China Postal Express (EMS), was preparing to raise funds through an IPO. The intent to go public stalled in December 2013 due to intense market competition from the country’s other rising express companies, like SF Express and YTO Express. While the freighter fleets of SF’s and YTO’s airline subsidiaries have grown rapidly over the past five years, China Postal Airlines’ fleet has only added thirteen aircraft since EMS stalled its plans to go public nearly five years ago. Earlier this year, murmurs of a renewed attempt by EMS to pursue an IPO surfaced, but little has since been said about plans to grow China Postal Airlines’ freighter fleet.

Returning to China Post’s German partner, Lufthansa Cargo finalized an order with Boeing for two 777Fs earlier this year and expects deliveries in February and March 2019. Both incoming freighters are expected to replace older MD-11Fs in Lufthansa Cargo’s fleet, of which the carrier continues to operate twelve of the fleet type. There is no necessity to park the MD-11Fs immediately, however, and Lufthansa Cargo has said that it may choose to continue operating the MD-11Fs as long as the air cargo market justifies the cost.

Those interested in learning more about air freight trends in Europe and afar are invited to join us Cargo Facts EMEA, to be held 4-6 February at The Westin Grand Frankfurt. Register before 14 December to take advantage of early bird rates. To register or for more information, visit www.cargofactsemea.com.