Express competition heats up in China

The Civil Aviation Administration of China (CAAC) looks set to grant YTO Express Airlines authority for scheduled domestic operation in China.

The CAAC allowed YTO Express Airlines, the air arm of Shanghai-based YTO Express, to begin charter operations on an international route to Korea in March, and has now given preliminary approval to YTO’s application for an air operator’s certificate that would allow scheduled domestic service. The public comment period on the application expires on 12 June, and, absent any surprises, final approval should follow fairly quickly.

YTO Express is one of China’s largest express operators, delivering over 1.5 billion packages annually, and the company had wanted for some time to follow in the footsteps of China Post and Shenzhen-based SF Express, and operate its own airline. When it received initial approval from the CAAC last year, it created YTO Express Airlines as a limited company and hired Su Xiufeng, former CEO of Zhejiang Loong Airlines, as President.

The new airline immediately began sourcing aircraft and hiring pilots and ground staff, and, as mentioned above, began limited charter service three months ago on a Shanghai-Seoul-Qingdao-Hong Kong-Shanghai route. However, while the charter service is operated out of Shanghai, scheduled operations will be from the new carrier’s hub at Hangzhou Xiaoshan International Airport.

The bulk of YTO’s shipments move on the ground, but, as can be seen in the illustration above, it currently uses leased-in and charter lift to ship packages on 760 flights daily, to/from 76 airports, so the desire to create its own air arm was hardly surprising.

So far, it appears that the company has purchased two 737-300Fs (28657 and 28662) from Aviation Capital Group, and leased a third from Yangtze River Express. The two purchased aircraft were formerly leased to Donghai Airlines, which operated for YTO, and were the youngest aircraft in Donghai’s freighter fleet. Cargo Facts believes that YTO is also in the process of having one or more passenger aircraft converted to freighter configuration but no announcements have been made.

YTO Express Airlines will have registered capital of RMB 400 million (US$64.6 million), 90% of which will come from Shanghai-based YTO Express Group, with the other 10% coming from two individuals, Yu Huijiao and Zhang Xiaojuan.

As a side note, it appears that Shenzhen-based Donghai may be switching its focus from freight to passengers. It began operation in 2006 with a single freighter-converted 737-300F, and steadily built its fleet to nine freighters, all 737-300Fs, by mid 2013. Since then it has parked one of the freighters, added five 737-800 passenger aircraft, and now returned two more freighters to the lessor.