CAAC cutting red tape for cargo start-ups?

After more than a year during which the Chinese Civil Aviation Administration took little action towards approving new start-up cargo airlines (we recall Guangzhou-based Longhao was the last new venture to receive its AOC in December 2016, and subsequently commence commercial service in March 2017), there is suddenly a flurry of activity. Just this week, Guangzhou-based China Air Cargo commenced commercial operations with a maiden revenue flight between Shenzhen and Changzhou with a recently re-delivered Precision-converted 757-200PCF. Meanwhile in northern China, just over 2,100 km up the coast from Guangzhou, the CAAC is nearing issuance of AOC to another startup, Tianjin Cargo Airlines. Does this mean other startups in queue will soon be granted permission to launch, or is this just a fluke?

While at this point it is hard to say, sources familiar with the CAAC’s dealings with startups point to the fact that both China Air Cargo and Tianjin Cargo Airlines and will be controlled and managed by well-established players in the industry.

China Air Cargo is controlled by Joy Air Holding, with minority investments from Guangzhou Donlinks Group, and Beijing Fuda Asset Management. Joy Air Holding meanwhile, is a 60-40 jv between state-controlled China Eastern Airlines, and AVIC (Aviation Industry Corporation of China).

Similarly, Tianjin Cargo Airlines will be a joint venture between three consortia (Tianjin Aviation Logistics Development Co., Ltd., Sky Holdings Co., Ltd., and Yang Hang Investment) that are controlled by heavy-hitting players in the industry, such as China Post, Beijing-based Capital Airport Group, Tianjin Airlines, and the HNA Group. Through its investments in Tianjin Airlines, and Tianjin Aviation Logistics Development Co., HNA will have a controlling stake in the new carrier.

Ownership alone seems insufficient to explain the CAAC’s change in attitude towards new startups, as China’s other cargo airline launch hopefuls are also controlled by an interesting mix of heavy-hitters in the industry. Following, is a brief summary of some of the other prominent start-ups on our radar:

• BrightStar Express Airlines, a joint venture of Tianjin-based Okay Airways and US-based Air Transport Services Group. The carrier was expected to receive its AOC last year, but has since been delayed. Its fleet will initially comprise of 737-400Fs, and could later incorporate 767Fs.
• Northwest International Cargo Airlines, a joint venture between Hangzhou-based YTO Express Airlines, and Western Airport Group is expected to launch next year. At launch, Northwest International Cargo Airlines’ fleet will likely consist of hand-me-downs from YTO. Further fleet plans have not yet been announced.
• Henan Cargo Airlines a joint venture between Luxembourg-based Cargolux, and a triad of companies representing the Zhengzhou Airport Economic Zone Henan Civil Aviation Development & Investment Co (HNCA), the Henan Airport Group, and the Xinggang Investment Group Company. The carrier originally intended to launch in 2016, but now expects to commence revenue service during 4Q18 with a fleet of three 747-400Fs.

Returning to the fleets of Tianjin Cargo Airlines and China Air Cargo, both airlines will deploy narrowbody freighters on routes serving the domestic express market.  Tianjin Cargo Airlines, will be led by Yu Wenyong, Chairman of HNA’s Turkey-based all-cargo carrier, myCargo Airlines, and will launch with a fleet of 737 freighters, with crews and aircraft expected to be transferred from HNA’s Shanghai-based cargo airline, Suparna Airlines, which currently operates twelve of the type. China Air Cargo’s second 757-200PCF meanwhile, is already converted, and will soon be redelivered. The carrier also expects to add domestically produced, new-build MA-600Fs for cargo feeder routes.