For centuries, the fabled Silk Road that wended its way between China and Europe brought together fragmented caravans of traveling merchants, facilitating the exchange of goods from geographically disparate regions of the world – much like a modern express carrier does today. Brilliantly colored Parthian tapestries and other luxury goods were transported across the relentless Gobi Desert by traders on camelback, where they eventually made their way to the eastern-most terminus of Chang’an, the ancient Chinese capital – now the modern-day city of Xi’an.
When a sea route between Asia and Europe was discovered in the 15th century, however, merchants turned to the more easily navigated ocean for safer passage. Gradually, cities along the overland Silk Road fell out of favor and sank back into the desert. Xi’an, too, saw its prominence rapidly decline as a prosperous commercial hub.
Even today, with the reignition of economic activity in modern China, most cities in Western China, like Xi’an, have been largely left out of the boom times of the last two decades. Freighter flights, sparked by the growth of e-commerce, quickly connected many of the prominent cities along the ancient Silk Road route to destinations in Eastern China, but have mostly ignored the western desert cities.
But these nearly forgotten outposts may soon be given new life. As history shows, supply chains are fluid and open to revision. Over the next few years, exotic Persian tapestries and other commodities may soon find their way to Western China’s rising air cargo gateways. As capacity continues to dwindle at the crowded air hubs of Eastern China, some western cities are poised to handle the overflow of air cargo. Also, the Chinese Government’s “Belt and Road” initiative, which aims to reconstruct a modern, multi-modal Silk Road, is moving forward and may be the catalyst for a Western China revival. With multiple start-up cargo airlines, and an ambitious air cargo development plan, Xi’an may once again find itself back in favor with the descendants of those Silk Road merchants from centuries ago – only this time, the goods will likely come in 757s rather than on camels.
The path to this Silk Road renaissance, however, is not guaranteed. Hangzhou-based YTO Airlines, for instance, knows first-hand the difficulties that many all-cargo carriers face when trying to expand operations at some of China’s busiest airports. A few years ago, the carrier tried to secure a large number of take-off and landing slots at Shanghai Hongqiao Airport (SHA), and the request was promptly met with refusal by the Civil Aviation Administration of China (CAAC). Capacity constraints and lackluster on-time departure records often mean that carriers with existing operations at an airport have priority when it comes to the distribution of new slots.
Given the geographic expanse and the population of China, however, few believe the country’s supply chain can function with only a couple major air cargo hubs. “If we talk about Europe or North America, there are more than a few significant air cargo hubs spread across the continent,” said David Su Xiufeng, vice president of YTO Express Group and chairman of YTO Airlines, in a recent interview with Air Cargo World.
“China’s economy is so huge, it will also warrant hubs in all regions of the country,” said Su as his eyes dashed across an invisible outline of the country. But the question is where? And which carriers will lead the charge?
Why not YTO?
Having already immersed himself in the world of air cargo throughout his entire career, with tenures at China Postal Airlines, Jade Cargo and Loong Air, Su has a knack for getting himself involved in cargo startups. So back in 2014, when Su’s previous employer, Loong Air, decided to funnel resources from its freighter operations into passenger operations, Su joined YTO Express – where he was tasked with launching an affiliate airline. With Su at the helm, the group moved fast. “Within about two years, we had our inaugural flight,” Su uttered with a confident grin.
Since launching operations two years ago, YTO Airlines has already placed eight narrowbody aircraft in a domestic rotation, operating from a base in Hanghzou. The carrier plans to add more aircraft just about as fast as it can acquire and crew them. Su, however, is most passionate about not just YTO’s expanding freighter fleet, but rather, the prospect of launching a joint-venture cargo airline in Western China.
“The CAAC will not allow us to fly into Shanghai, so we’re planning early to seize opportunities in the West,” Su said triumphantly.
Determining precisely where these opportunities will surface is a bit of a challenge in the vast area referred to as Western China. According to official administrative divisions, the region encompasses six provinces, two autonomous regions and the Chongqing Municipality. In the near-term it becomes less-certain where the more prominent air cargo hubs will develop, let alone which cities will matter most. But there are clues as to where demand for air cargo will intersect supply.
In some ways, Xi’an is already emerging as a bridgehead to destinations not easily accessed by rail or road. In October of last year, YTO Airlines opened an air corridor connecting Turpan in the Xinjiang autonomous region, and Yinchuan via Xi’an. Initially, the route was operated six times per -week with a 737-300F. Upon delivery of the carrier’s first 757F, at least some frequencies have since been upgauged to the larger aircraft. Su said that, apart from express parcels, the new flights are helping agricultural producers in Xinjiang connect fruits, vegetables, beef and mutton to hungry markets in other parts of the country.
But merely serving Xi’an with scheduled freighter flights will not transform it into a global hub. This, Su said, “requires a new international airline to be based in the region.” Last year, officials from the Shaanxi municipal government and YTO Express agreed to make such an airline a reality, outlining plans to establish a joint-venture cargo airline in Xi’an that will be known as China Northwest International Airlines.
The right people
The secret to a successful cargo airline requires not only a business case, but also the right partners, according to Su. “If you are in the right place at the right time, and have the right partners, why not do business?” Initially, teams from YTO Airlines will work closely with the start-up airline to ensure things get off the ground without turbulence. “The company will start up with 737-300Fs from YTO’s fleet, and will later add widebodies to expand international routes,” said Su. Once off the ground, YTO will allow China Northwest to operate with more autonomy. Though the airline must wait for an AOC before it can begin flight planning, Su already envisions flights to destinations across Central Asia and Southeast Asia from the Xi’an Belt and Road Gateway.
Xi’an’s Xianyang International Airport (XIY), meanwhile, is doing its part to ensure the airfield is prepared to accommodate additional international freighter flights. “Xi’an has entered a new era of rapid urban and economic development, and air cargo and logistics industries will usher in significant opportunities for broader development,” said Li Wei, general manager of the marketing department at Xi’an Xianyang International Airport Co., Ltd. By 2020, the airport said it hopes to boost its annual cargo and mail handle to 500,000 tonnes – more than double its 2016 handle of 233,000 tonnes.
Boosting air cargo volumes will require the airport to invest heavily in new infrastructure. Li says XIY plans to develop a 600,000-square-meter space east of the airport into a “Belt and Road” air cargo hub, where China Northwest would operate. “The integrated transport hub will include two new runways and 107 parking positions, to further expand the cargo area.” Expanding cool-chain logistics facilities and improving customs clearances processes will increase the appeal of launching international freighter flights from the airport, Li added.
But how far west?
Although few experts doubt demand for international airfreight consolidations into and out of western China will grow in the coming years, not all are convinced that Xi’an is destined to become a major gateway. “Looking at the development of traditional airports, limited slots with a preference for passenger aircraft, increasing flight delays etc., it is very much conceivable that there will be a stronger segregation between passenger-focused and freight-focused airports in the future,” said Alexander Korte, senior director of operations for air and ocean in North/Central China for Denmark-based forwarder DSV.
Korte believes that Zhengzhou Airport (CGO), which has long been courting cargo operators, may have the edge when it comes to competing with gateways like Xi’an. “Next to our established hubs in PVG [Shanghai Pudong], PEK [Beijing] and, to some extent, CTU/CKG [Chengdu/Chongqing], our company has been quite active to develop CGO as an additional gateway, servicing origins across the country.”
Not only has Zhengzhou already emerged as a popular consolidation point for shippers willing to accept longer transit times in exchange for lower pricing, the appeal goes beyond cost, said Korte. In recent years, the Henan provincial government has worked to establish a free trade zone and improve customs clearance processes. Additionally, it has made “strong investments into Cargolux, which serves as a backbone high-quality carrier to service this market.” Zhengzhou’s other advantage, Korte said, stems from the growing presence of industrial giants like Foxconn in the region, which “will create, so to speak, a more-healthy year-long baseload for the location.”
Huang Yu, a former cargo airline executive and CEO of aviation consultancy Gpool, concurred that Chengdu, Chongqing and Zhengzhou will continue developing as tier-two cargo hubs, and said he expects annual double-digit volume growth over the next five years. Still, he doubted the prospect of any hub displacing Shanghai Pudong, “I don’t think any of the tier-two hubs can rival PVG,” he said. “They lack air capacity, and lack the support of a strong sea port.”
Even if forwarders are drawn to other gateways, China Northwest International Airlines could still make Xi’an a sizable express hub. After all, the location of an express hub is much at the discretion of the integrator, and in conjunction with the Xi’an start-up carrier’s launch, YTO Express is building a massive express sortation center. Such a hub will ensure that cross-border e-commerce volumes flow smoothly into and out of China through the ancient capital.
YTO’s Su remains assured that Xi’an is bound to become the central spoke of the Silk Road of the skies, as it was centuries ago in the age of wagons: “Xi’an will develop into one of the best multi-modal hubs in China, as it becomes the leading city in Western China.”