Will partnering with Alibaba’s Cainiao payoff for global carriers?

Following an MoU with Cainaio, will Alibaba-related parcels become a common sighting on SkyCargo freighters? s

In recent weeks, Alibaba’s Cainiao Smart Logistics Network has redoubled its focus on cross-border e-commerce with a string of new investments into logistics centers at six cities around the world, and, as of this week, new partnerships with global carriers. These initiatives support the Alibaba Group’s goal of reducing average delivery times to 24-hours across China, and 72-hours to the rest of the world, a cause for which Alibaba executive chairman Jack Ma has earmarked RMB100 billion.

If Cainiao succeeds in meeting these objectives, demand for air cargo will undoubtedly see a major boost. Already, an average of 100 million parcels move through Cainiao’s logistics platform each day, and continued rapid growth is expected in the cross-border e-commerce segment.

But another key pillar of Alibaba’s grandiose vision for cross-border deliveries includes major reductions to logistics costs. Ma has said a key aim of the Cainiao Network is to “push logistics costs down to less than 5% of China’s gross domestic product from around 15% at present.” While trying to reduce costs as a percentage of GDP may be an unconventional way to drive efficiency, it is clear that Cainiao is looking to keep delivery costs to a minimum, leaving the question of whether there will be opportunities for carriers to work with Cainiao in an amiable and mutually-beneficial manner.

A few carriers have already expressed concern. An executive at one of the largest combination carriers based in China told Cargo Facts that his airline did not see many opportunities to work with Cainiao. He added, “Because cost will be their first concern, any airline will lose if they rely on Caianio.” This suggests that, much like Amazon, Alibaba may choose to invest in airlines and pursue the development of an own-operated fleet. At present, Alibaba has stakes in express integrators YTO Express and its airline-affiliate, YTO Cargo Airlines. The company also backs other express companies, such as Best logistics, and, as of last month, ZTO Express. YTO’s freighter fleet consists of narrowbody aircraft which fly mostly within China. Over the next few years, the airline expects to boost service to international destinations, likely from Hangzhou. Cainiao could support the development of YTO’s long-haul fleet and network.

Alternatively, airlines may find ways to partner with Cainiao. Today, Emirates SkyCargo signed an MoU with Cainiao to “jointly facilitate the delivery of cross-border parcels as Cainiao looks to expand its global logistics infrastructure with Dubai as a hub,” according to a release from Emirates. While the particulars regarding how the two companies will cooperate “will be announced progressively as they are developed by the two parties,” the MoU suggests that Cainiao will utilize SkyCargo capacity for e-commerce shipments destined for, or originating in, the Middle East.

Dubai was selected as the future site for one of six Cainiao logistics hubs, along with Hong Kong, Kuala Lumpur, Liege, Moscow, and Hangzhou. Cargo Facts would not be surprised if, moving forward, Cainiao pursues partnerships with carriers that have significant operations near these cities as well.

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