Monday, September 28, 2015

New Express Air Freight Joint Venture Hatched at Chinese Finance Summit

Cargo Carrying Airline Will Serve Local Growing Asian Market
Shipping News Feature
CHINA – ASIA – During the Fourth Annual China Air Finance Development Summit, Okay Airlines, ATSG West Limited, Vipshop and another five parties announced the establishment of an express air cargo joint venture (JV) serving multiple destinations both within China itself, Hong Kong, Macau and Taiwan and surrounding countries. The JV, named United Star Express Airlines, will be registered in Tianjin’s free trade zone, with registered capital of 400 million RMB (US$63 million). Pending approval by related government parties, freight only flight operations are planned to commence in mid-2016. The principal commercial partners in the venture include:
  • Okay Airlines, which 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.
  • ATSG West Limited, a subsidiary of Air Transport Services Group Inc., a turn-key provider of mid-range Boeing freighter aircraft, along with leasing and operating solutions, which was founded in 1980 and is based in the United States.
  • Vipshop Holdings, an online discount retailer for brands in China.

Okay Airlines will provide the largest share of the registered capital of United Star Express and Okay Airlines Chairman, Wang Shusheng, will be the JV company’s chairman, with the Vice Chairman being Richard Corrado, Chief Commercial Officer of the Air Transport Services Group and President of its aircraft leasing subsidiary, Cargo Aircraft Management.

The new airline will principally serve rapidly growing express air cargo demand driven by e-commerce growth in China and surrounding countries. From 2010 through 2014, the express market grew at an average of 30% per year. Express air services in China now rely mostly on the excess capacity in the bellies of passenger aircraft. According to ATSG, fewer than 120 all-cargo freighters operate within China, and only a small portion of those serve express markets.

The growth rate of China’s e-commerce markets exceeds that of the air express market. 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.

United Star Express will be a new company that possesses its own airline operating certificate and will operate independently in accordance with international standards, with its own independent airline insignia, fleet, routes and organisation.

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 aircraft, to provide safe, high quality, reliable domestic and international air cargo services. The company aims to gradually add medium- and long-distance cross-border express and cargo charter services that cover Europe and the America regions.

Okay Airlines and the other Sino-foreign parties also 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 signals the official entry into the preparation phase for United Star Express to commence services in mid-2016.

Photo: Okay has a history of purchasing Boeing aircraft like this 737.