New all-cargo airline to enter China’s booming courier market

New all-cargo airline to enter China’s booming courier market

HONG KONG — A new all-cargo airline will enter greater China’s fast-growing express market next year after a mainland carrier, a Nasdaq-listed aircraft leasing company and an online retailer set up a joint venture to create United Star Express Airlines.

The deal was reached in Tianjin at the Annual China Air Finance Development Summit when Okay Airlines, leasing company ATSG West Limited and retailer Vipshop registered the new freighter operator in Tianjin’s free trade zone with $63 million start-up capital.

It will be established pending approval by China’s regulatory authority and plans to start flight operations in mid-2016, ATSG said in a statement.

United Star Express will mainly serve the rapidly growing express air cargo demand driven by e-commerce growth in China, Taiwan and Hong Kong. From 2010 through 2014, the express market has been growing at an average of 30 percent per year.

Express air services in China now rely mostly on excess capacity in the belly of passenger aircraft. Fewer than 120 all-cargo freighters operate within China, and only a small portion of those serve express markets.

The mainland’s leading operator in this segment of SF Express, but there is plenty of business to go around. ATSG said the growth rate of China’s e-commerce markets exceeded that of the air express market, and therefore United Star Express will provide third-party express and charter aircraft services that cover the country and surrounding Asia regions to domestic and international express companies. Gradually, the company will add medium and long distance cross-border express and cargo charter services that cover Europe and the America regions.

The growing Chinese courier market is driving investment by integrators such as UPS, which today announced it has expanded its presence in 13 cities across the mainland, improving transit times and extending shipment cut-off times.

“Chinese exporters are now adopting a more customer-centric approach, which requires more collaborative partnerships and logistics support. Our latest enhancements is a response to this demand,” said Richard Loi, president of UPS China.

Okay Airlines was established in 2005 as China’s first private-sector airline and provides passenger and air cargo services within China from its operating bases at Tianjin Binhai International Airport and Changsha Huanghua International Airport. U.S.-based ATSG West Ltd. is a subsidiary of Air Transport Services Group Inc., a turn-key provider of mid-range Boeing freighter aircraft, along with leasing and operating solutions. Vipshop Holdings is an online discount retailer for brands in China.

Okay Airlines will provide the largest share of the registered capital of United Star Express with 43 percent. Okay Airlines chairman Wang Shusheng will be the JV company’s chairman, vice chairman will be Richard Corrado, chief commercial officer of Air Transport Services Group and president of its aircraft leasing subsidiary, Cargo Aircraft Management, Inc.

Within the first year of its flight operations, United Star Express expects to have six small and midsize freighter aircraft, including Boeing 737, Boeing 757 and Boeing 767 planes, to provide safe, high quality, reliable domestic and international air cargo services, the statement said.

Okay Airlines and the other Sino-foreign parties will contribute to the joint venture their individual strengths and resources in airline operational management, international management, market development, government resources, and financial support.

The signing of the JV agreement this week signals the official entry into the preparation phase for United Star Express to start offering services next year.

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.