E-commerce giant Alibaba Group will take a 14% stake in Chinese STO Express through a US$693 million deal. The move strengthens Alibaba’s access to STO’s network, while the new surge of investment will likely help the express carrier in its aims to grow its aircraft fleet.
STO Express announced that its controlling shareholder plans to set up a new subsidiary, which will own a 29.9% stake in the company, according to Reuters. Alibaba will invest $693.44 million for a 49% stake in the new subsidiary, which will effectively give Alibaba a 14% holding in STO Express.
STO is one of China’s major express carriers and has in the past transported freight for a mix of companies. Many of the parcels sold on Alibaba’s e-commerce platforms are fed directly into STO Express’ network, via Alibaba’s logistics subsidiary, Cainiao. However, Alibaba also holds a significant stake in and has more direct links to carrier YTO Express, begging the question of why Alibaba is looking to invest in another express company.
Unlike YTO Express Airlines, which operates its own dedicated freighter flights, STO has dabbled with scheduled charters with carriers like Silk Way Italia and Volga-Dnepr.
For Alibaba, STO likely offers increased access to international destinations￼. Over the past three years, STO has increased its network reach from Chinese cities to European destinations, like Prague (PRG) and Milan – via Brescia Montichiari Airport (VBS), which is located 100 km east of the city – and is most recently considering adding linkages to Budapest (BUD).
For STO, the new investment will aid the express carrier in furthering its business plans. The company could potentially transition to developing a fleet of dedicated freighter aircraft. However, it is more probable that STO will instead explore the expansion of scheduled charter operations due to a shortage of pilots in China and lower capital requirements involved in setting up these operations, compared to an own-operated network of freighter aircraft.
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