Written by Yang Qiao
Editor / Tian Yanlin
The tough battle in the express delivery industry is being fought from the ground to the sky.
A month ago, the 75th all-cargo aircraft of SF Airlines officially put into commercial operation, the model is Boeing B767-300. This is the seventh new capacity aircraft that SF Airlines has put into operation this year.
Just a week before the plane took off, the runway of Hangzhou Xiaoshan Airport welcomed a Boeing B757-200 painted with four dark purple characters of “Yuantong Aviation”. This is the sixth aircraft that YTO Airlines has introduced this year, and the company’s ninth Boeing B757 all-cargo aircraft.
Coincidentally, on the same day, Jiangsu JD Cargo Airlines Co., Ltd. (“JD Airlines”), a subsidiary of JD Logistics, finally got the “pass” issued by the Civil Aviation Administration of China and announced the official launch of operations.
So far, in the field of private cargo aviation, the “three major express giants” of SF Holding, YTO Express, and JD Logistics have fought head-to-head.
When the business model of small profits but quick turnover cannot meet the needs of express delivery development, express delivery giants clearly realize that it is no longer sustainable to compete with their peers for low prices. The entire industry has reached a critical moment from a “price war” to a “value war”.
Civil aviation expert Lin Zhijie told Caijing World Weekly that the aviation logistics industry has a relatively high entry threshold. First, you must obtain an air cargo license and establish a cargo airline before you can purchase an aircraft. Only by dispatching professionals and applying for flight slots and traffic rights can an airline truly operate.”
Although it takes a lot of effort, and the cost of a plane is as high as 100 million yuan, the courier giants still rushed to the air battlefield without hesitation. The three armies lined up, and the planes that were laid out were their spears and shields. While sprinting with all their strength, they also blocked the opponent’s attack.
SF Airlines, the best way to go?
At the beginning of 2008, an ice and snow disaster caused express vehicles to lie on the road and stagnate. All this was seen by Jin Guoqia, the then director of the supervision department of the Zhejiang Postal Administration. He wrote to Wang Wei, chairman of SF Express: “A courier without wings will always be a reptile.”
This sentence pierced Wang Wei’s heart. In November of that year, SF Express seized the opportunity to buy an open space in Hangzhou Xiaoshan Airport, and jointly invested with Xiaoshan Airport to build an air cargo hub. In June of the following year, Wang Wei invested another 710 million yuan to build automated sorting equipment here. The total investment of the whole project is 1.38 billion yuan.
But these are not enough. At the end of 2009, after obtaining the operation license issued by the Civil Aviation Administration of China, SF Express officially became the first private express delivery company with its own airline in China.
According to the 2022 semi-annual report of SF Holding, the company is now the largest cargo owner of air cargo in China, with a total air cargo volume of 890,000 tons. At present, SF Express operates 95 all-cargo aircraft, 72 self-owned aircraft, and has 699 pilots, including 288 captains and 411 co-pilots.
In fact, in order to send his courier brother to the “heaven”, Wang Wei started planning in 2003. At that time, he was not satisfied to let express parcels appear sporadically in the belly hold of various airlines.
Affected by SARS that year, the overall operation of the airline was not good. Wang Wei quickly fell in love with the then professional cargo airline “Yangtze River Express” (now renamed “Jinpeng Airlines”). The other party 5 aircraft, chartered for one year.
However, this move was neither favored by the company, but also made SF’s partners Shenzhen Airport and Yangtze River Express feel “unreliable”. One flight hour costs 17,000 yuan and only pulls 1.7 tons of cargo. The industry bluntly said that Wang Wei was “crazy”.
Two days after the contract was signed, the first full-cargo plane carrying SF Express flew from Shenzhen Airport to Shanghai, with a round-trip shipping fee of 68,000 yuan. At that time, the route from Shenzhen to Shanghai was the most onerous. Under the SARS environment, people had a strong demand for express delivery, and Wang Wei’s plane was quickly filled. Especially in May of that year, it took two round trips in one night to complete the express delivery, which shook the entire express delivery circle.
Wang Wei’s “chartered flight delivery” was unimaginable for many land-based express companies at that time. For a long time, there has been an obvious “pyramid” of express companies in air logistics. The most basic option is bulk shipping, that is, express companies use the belly space resources of passenger planes to deliver goods. The next layer is charter flights. After SF Express, YTO chose charter flights in 2012, Shentong in 2016, and Zhongtong in 2019.
And at the top of the industry is undoubtedly the self-built airport, with its own aircraft. When other private express delivery companies were still fighting on the ground transportation battlefield, SF Express had already started preparations. Today, one-third of every 100 cargo planes in the country come from SF Express.
An industry insider told Caijing World Weekly that, in addition to China Post, only SF Express is in the leading position in the domestic high-end express delivery market.
In order to realize the dream of “flying to the sky”, Wang Wei was willing to spend a lot of money on the plane. As soon as SF Express went public in 2017, it raised nearly 8 billion yuan to invest in four major projects. Among them, nearly 2.686 billion yuan was invested in aviation materials and flight support.
In 2019, SF Express issued 5.8 billion yuan of convertible bonds, of which 2.05 billion yuan was used for the purchase and maintenance of aircraft and aviation materials; in 2021, SF Express plans to increase the 20 billion yuan plan, a total of 7 billion yuan is planned to be used for the construction of airport projects. and aviation material purchase and maintenance.
However, China Post was strong in the past, and new entrants YTO and JD Logistics were eyeing it. It may not be easy for SF Express to become a leader in aviation logistics.
In order to further reduce costs and improve timeliness, in February 2018, Hubei Ezhou Huahu Civil Airport, an international airport jointly built by SF Express and the government, was approved, becoming SF Express’s third domestic aviation hub after Shenzhen and Hangzhou. But unlike the latter two, the airport project targets a super transshipment center that can handle more than 2 million express and freight shipments a day—Memphis Airport in the United States.
It is reported that Ezhou Airport is located in the hinterland of central China. It is the first professional cargo hub airport in Asia and the fourth in the world. It can convert SF Express routes from “point-to-point” to a hub-and-spoke model. The total investment of the project reached 30.842 billion yuan.
At 19:11 on March 19 this year, with the smooth landing of SF Airlines Boeing 757-200 all-cargo aircraft on the west runway of Ezhou Huahu Airport, the airport test flight mission was successfully completed. Test flight work at the airport. At present, Ezhou Airport has been officially put into operation.
(Photo/Visual China)
Yuantong Jingdong, can the latecomers take the lead?
On August 10, 2015, at Hangzhou Xiaoshan International Airport, a Boeing 737-300 cargo plane named “Taobao” landed smoothly, which is the first self-owned cargo plane of YTO’s airline.
This year, YTO has ushered in a “highlight moment” – Alibaba and Yunfeng Fund have invested 2 billion yuan in YTO. Yu Weijiao, chairman of Yuantong, was full of pride after receiving the investment, saying that the company would be bolder in seeking changes in the next 15 years.
In June of that year, YTO Airlines was established and obtained a license to “fly”, becoming the third domestic express company with an airline after China Post and SF Express.
Like Wang Wei, Yu Weijiao is an avid airplane addict. He always believed that “a courier company without a plane is not a real courier company”. As early as 2005, Yu Weijiao had the idea of ”buying a plane”, but due to lack of funds, the plan has been shelved.
Ten years later, with Ali’s “backing”, Yu Weijiao made a lot of money. In 2015, he ordered 15 Boeing 737-800BCF in one go, and was called “the biggest buyer in the history of private express delivery in China” by the industry. Since then, YTO has successively invested in the construction of YTO Express Southwest Management Area Headquarters Base, Guangxi Regional Headquarters Base and South China Headquarters Base.
At that time, Yu Weijiao successfully invited Su Xiufeng, the former president of Loonglong Cargo Airlines, to serve as the president of YTO Airlines, and now the latter assumes the position of chairman of YTO Airlines.
In 2018, watching SF Express’s airport construction in full swing, Yuantong announced in July that it would invest 12.2 billion yuan to build a global aviation logistics hub at Zhejiang Jiaxing Airport. According to Yu Weijiao’s vision, the hub is expected to have a cargo and mail throughput of 2.4 million tons in 2050. But it has not yet been put into operation.
As of June 2022, YTO has a total of 10 self-owned aviation fleets, has established its own pilot management system and training system, has more than 140 pilots, 70 captains, and a front-line maintenance team of more than 200 people.
Since YTO opened its first Tianjin-Astana international route in 2018, YTO Airlines has opened more than 80 international routes, with an average daily flight of over 40 in peak seasons, achieving full coverage of the Asian route network in addition to the Middle East, and international cargo business accounting for 40% of the total. ratio of more than 90%.
Yuantong told Caijingxia Weekly that three new international routes were opened in October, and two more will be opened in early November. In addition, the company will cooperate with Commercial Aircraft Corporation of China, Ltd., and the world’s first domestically-made all-cargo aircraft ARJ will be delivered by the end of this year.
(Photo/Visual China)
It is not only the Yuantong family that regards SF Express as an object of transcendence. Liu Qiangdong has always believed that Wang Wei is a “very recognized and respected opponent”. However, compared with SF Express and YTO, JD.com’s “Flying Dream” lasted for three years, and it was not realized until the end of August this year.
At the earliest, JD Logistics’ layout of aviation logistics was carried out in the form of cooperation with airlines. In 2017, JD Logistics cooperated with China Eastern Airlines to set foot in the aviation logistics sector, mainly relying on the belly of passenger aircraft and charter flights, but this form has never been able to meet the increasing business volume of JD Logistics.
In September 2019, JD Airlines was registered and established. Suqian JD Zhanrui Enterprise Management Co., Ltd. holds 75% of the shares, and Nantong Airport holds 25% of the shares. However, it was not until two years later, in August 2021, that JD.com was approved by the Civil Aviation Administration for its establishment and officially launched the preparations for the establishment of a public air transport enterprise.
In May 2022, the official website of the Civil Aviation Administration stated that the preparatory work for Jingdong Airlines has been basically completed, and Jingdong Cargo Airlines has been approved to introduce 3 B737 freighters. Jingdong Cargo Airlines has also cooperated with 14 pilots, 42 maintenance personnel, and 18 dispatchers. , 7 transport personnel signed a labor contract.
Although it has waited for these days, JD Logistics has not been idle in the past three years. It once wanted to obtain a pass for air operations by acquiring Fortune Wings Airways, but the cooperation between the two parties finally fell through. Later, it supplemented air capacity through acquisitions.
In August 2020, JD Logistics acquired Leap Express, known as the “Little SF Express” in the industry, for 3 billion yuan. The latter is known for shipping. Although it does not have its own aircraft, it has 17 all-cargo aircraft charter resources, and has taken 70% of the aviation belly capacity in southern China. By the end of June 2022, JD Logistics had covered more than 1,000 air cargo routes in China.
Although Jingdong Airlines started late, its entry has also brought new excitement to its old rivals. As my country’s first cargo airline funded by an e-commerce platform, JD Logistics has now been listed independently. With the support of capital, a new story may occur between the “Big Three” of express delivery at an altitude of 10,000 meters in the future.
(Photo/Visual China)
Behind the grab for “air supremacy”
It is understood that the price of a Boeing freighter is hundreds of millions of yuan, and the annual maintenance fee is even more huge. “Buying an aircraft” and “maintaining an aircraft” are both high-cost expenses.
According to YTO, the cargo capacity of cargo aircraft varies according to different aircraft models. Currently, the cargo capacity of Boeing B757 all-cargo aircraft is about 26 tons, and the cargo capacity of Boeing B767 all-cargo aircraft is about 57 tons. “Calculating 2,000 flight hours per year, an aircraft costs about 80 million to 100 million yuan in operation and maintenance costs. It is not easy to make money under normal circumstances.” Lin Zhijie said.
Zhao Xiaomin, an expert in express logistics and CEO of Guanshuo Capital, also believes that the cost and maintenance of aircraft are now very critical, and will lead to a lot of debt. For some companies, there is no such ability, only a few companies with a clear strategy and clear goals can make a big difference.
Taking SF Express as an example, although the company takes air operations as its core competitiveness, the 2020 annual report shows that the business volume of SF Express for the whole year was 8.137 billion pieces, of which 900 million pieces were air pieces, accounting for only 11% of the total business volume. As of the end of June 2022, SF’s debt ratio has increased from 48.94% in 2020 to 55.57%.
Looking at YTO, in the first half of 2022, the aviation business achieved revenue of 820 million yuan, a year-on-year increase of 40%, and a gross profit margin of 11.9%. In addition to the freight forwarding business, the profit contributed by the two businesses is only 190 million yuan.
The cost is high and the profit is low. Why do the courier giants desperately fight for “air dominance”?
In fact, with the end of the price war in the express delivery industry, practitioners all know that improving service quality and finding differentiated competitiveness are the keys to the next development of enterprises.
Zhao Xiaomin believes that express companies are scrambling to deploy air logistics, and they need to consider the location and pattern of the development of different enterprises. “If you want to become a domestic first-class or internationally competitive logistics company, air cargo is essential. To be among the world’s first-class companies, having 100 aircraft is the golden section.”
Indeed, looking at the international market, aviation logistics companies have always been a major shortcoming in the development of my country’s international air cargo market. SF Express, YTO and JD.com are clearly aware of this problem.
Recently, Su Xiufeng, chairman of YTO Aviation, said in an interview with Caijingxia Weekly that in the development of aviation logistics, the overall fleet of freighters in the industry is small, and the concentration of freight airlines is low. problems such as poor comprehensive operational capability.
But in order to gain a firm foothold in the world, it is necessary not only to have a strong enough aviation fleet, but also to have sufficient aviation hubs. Only when both conditions are met can it be shown that this is a logistics company that is close to the top of the world. “But there are not many companies with relevant conditions. There are less than 50 companies in the world with more than 50 aircraft.” Zhao Xiaomin said.
In his view, the high cost of deploying air logistics may in turn become a competitive barrier for companies. Self-operated aviation provides solid support for enterprises to expand higher-quality customers, enabling enterprises to meet the delivery needs of high-value-added products such as high-end manufacturing, medical care, and fresh food. “From the perspective of air transport capacity, before 2030, the air cargo market will be in a state of insufficiency, and the aircraft capacity cannot keep up, resulting in the price of aircraft being raised very high, and everyone wants to buy cargo planes.”
However, Su Xiufeng said frankly that China’s cross-border e-commerce is still in the stage of rapid development, but “Made in China” is still in the period of industrial transformation and upgrading, and the realization of industrial synergy through digitalization between the manufacturing and logistics industries is also in the initial stage. The outlook should be “cautiously optimistic.”
However, since the epidemic, the development of the air cargo industry, as well as the Ministry of Transport’s planning and layout of aviation hubs, have shown that air logistics will be a key sector for enterprises to be competitive in the long run in the future. Express companies generally believe that globalization is destined to be the development direction of air logistics. With the development dividends of RCEP (Regional Comprehensive Economic Partnership) and the “Belt and Road”, the demand for domestic goods to go overseas is increasing, and the strong export demand is also for China. Air cargo companies bring new opportunities.