Date
19 October 2017

China Southern seeks to take off on Zhejiang e-biz freight

Can logistics demand driven by the thriving e-commerce sector breathe new life into China’s battered airfreight industry? China Southern Airlines (01055.HK, 600029.CN, ZNH.US), one of the nation’s big three carriers but a laggard in the cargo business, certainly appears to think so.

Last month, the airline kicked off a long-haul freight route linking Los Angeles and Hangzhou, capital of east China’s Zhejiang province and home to a number of e-commerce heavyweights like Alibaba Group.

The move is a bold one as Hangzhou is seldom regarded as an aviation hub, given its close proximity to Shanghai. But what ultimately may have convinced China Southern is some upbeat trade statistics from the region.

Figures from the Zhejiang provincial department of commerce have shown that the province exported more than US$42 billion worth of goods to the United States last year, ranking third nationwide after Guangdong and Jiangsu. And, interestingly, more than 40 percent of the trade was conducted via online platforms like Alibaba.

Zhejiang’s overall exports soared to US$312.24 billion last year as a growing number of local enterprises turned to online trade facilitators and tapped into the province’s well developed e-commerce infrastructure, turning the region into a burgeoning market for freight carriers.

China Southern plans to further strengthen its service on the Hangzhou-LA route, taking it to three to four departures a week, The Economic Observer reports. Other carriers have also taken note of the robust demand.

Shanghai-based China Eastern Airlines (00670.HK, 600115.CN, CEA.US), which dominates the airfreight market in Zhejiang and the rest of east China, has moved quickly to fend off the new challengers. In contrast to the new-route approach, it has been trying to lure Zhejiang exporters to transship their goods from Shanghai Pudong Airport, one of the nation’s predominant international aviation gateways.

An army of 1,000 heavy trucks are being deployed by China Eastern. Goods can be swiftly conveyed from factories in Zhejiang to Pudong airport within two to three hours, thanks to the existing highway grid. It has also been reported that the airline has allied with Alibaba to offer airfreight logistics services for vendors, covering ground transportation, warehousing and customs clearance.

Analysts point out that China Southern is eager to build a presence in the Yangtze River Delta as its home base Guangdong has shown signs of fatigue in airfreight demand. As establishing a foothold in Shanghai can be hard to achieve due to China Eastern’s virtual monopoly there, the new US route from Hangzhou that is right on the doorstep of many exporters can be a feasible alternative. But beating the one-stop Shanghai transshipment solution supported by a far more extensive global network won’t be easy.

Also, airlines rushing to Zhejiang need to bear in mind another fundamental factor – unlike electronic gadgets assembled in Guangdong or Jiangsu, a significant proportion of Zhejiang’s exports to the US and other key markets comprise garments, accessories, daily necessities and other low-value added products. Container shipping may still have an upper hand in winning cargo compared to the more expensive air transportation.

– Contact the writer at [email protected]

RC

 

EJ Insight writer

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