Air Cargo Welcome Policy Favorable, Express Industry

On the evening of March 31, Yuantong Express (06123.HK) released its 2019 annual report. According to the financial report data, Yuantong Express's operating income in 2019 reached 3.897 billion Hong Kong dollars, a decrease of 12.7% year-on-year, and net profit attributable to the mother fell 74.9% to 150 million Hong Kong dollars.

As a holding subsidiary of Yuantong Express (600233.SH), relevant data of Yuantong Express also reflects the embarrassing situation of express companies in the international air cargo business.

'(In terms of air cargo) At present, the express delivery department is developing fast, but its share is still not high, especially the international cargo capacity is relatively weak.' On March 29, civil aviation expert Lin Zhijie told a reporter from Time Weekly.

The air cargo capacity is mainly composed of two parts: the belly cabin of the passenger plane and the all-cargo plane. However, my country has a small number of all-cargo planes and mainly depends on the belly cabin resources of the passenger plane.

Affected by the spread of the New Coronary Pneumonia epidemic worldwide, the number of international flights has further declined, and the proportion of cargo carried in the abdominal compartment has also declined.

In contrast, all-cargo aircraft will become the choice of more express delivery companies. This will also accelerate the participation of express delivery companies in the air cargo market.

'This epidemic has impacted the global air transportation market. The opportunities for Chinese express logistics companies to supplement the international air cargo short board through overseas acquisitions will increase in the future.' On March 29, Yang Daqing, a special researcher of the China Logistics Society, analyzed the Times weekly reporter.

Competition air capacity

According to the annual report data released by Yuantong Express International, the air freight forwarding business as its largest main business, operating income in 2019 was 2.201 billion Hong Kong dollars, a decrease of 29.6%.

Yuantong Express said that on the one hand, it was due to the economic recession in the surroundings caused by the Sino-US trade war, and on the other hand, it was due to 'decreased demand for air transport services from customers in the air transport segment.'

At the same time, international express and parcel services have become rare highlights in the annual report. Data show that the business achieved an operating income of 642 million Hong Kong dollars, a year-on-year increase of 642.3%.

In this regard, Yuantong Express also said in its financial report that it will further use the resources of Yuantong Express to enhance its international freight capacity.

Compared with other 'Tongda' express delivery companies, Yuantong Express's own aviation fleet is its biggest advantage in developing international shipping business.

According to Yuantong Express's semi-annual report for 2019, as of the end of June 2019, Yuantong Airlines had its own aviation fleet of 12 aircraft. In the first half of 2019, its external sales revenue exceeded 99 million yuan, and its own aviation operation capacity has been significantly improved.

Yuantong Express said in the 2019 semi-annual report that as the domestic express delivery industry gradually shifts from price competition to service quality competition, and the fierce competition of domestic express delivery companies gradually expands from the domestic market to the international market, its own air transportation network will be the future industry competition The winning point.

Those who hold this view also include SF Holdings (002352.SZ), the cargo airline with the largest number of domestic freighters.

On March 23, SF Holdings released its 2019 annual report. The annual report shows that SF Holdings is flying 58 self-operated cargo planes.

SF Holdings' all-cargo aircraft plus bulk airlines totaled 2102 air routes, with a total of 1.5455 million flights in 2019, with an average of 4234 daily flights. In 2019, air shipments totaled approximately 1.3532 million tons, with an average daily shipment of 3707 tons.

On March 30, at the SF Holdings online performance briefing session, Chen Fei, deputy general manager and chief strategy officer of SF Holdings, told the Times reporter that SF has plans for investment in the aviation network in the short, medium and long term. In the current environment, SF Express will increase investment in domestic and international routes, improve and optimize the aviation network, and increase cooperation with other airlines to obtain more cost-effective route resources and further consolidate its advantages in aviation logistics. .

'In the long run, the company will use Ezhou Airport as an aviation hub to reconstruct the aviation network, and will switch from a point-to-point folio mode to a hub-and-spoke network to further optimize the timeliness, stability, and coverage of the air network.' Chen Fei Speaking to the Times reporter.

Good policy

As the main method of air cargo transportation, the belly space of the passenger aircraft is small, and the cargo volume is low, but the number of flights is huge.

In 2019, the number of flights of SF Holdings' discrete airlines (that is, the use of passenger belly space) was 1.5007 million, which was much higher than the 37,800 flights of all cargo aircraft.

In contrast, the advantages of all-cargo aircraft are large space and high cargo volume. According to SF Holdings’ annual report data, it can be deduced that the average cargo volume per flight of a full cargo aircraft is 15.3 tons, while the average cargo volume per flight of a passenger belly is only 0.51 tons, a difference of nearly 30 times.

According to the data from the Research Center of Airport Economics of Civil Aviation University of China, the proportion of abdominal cargo in China’s international routes is 48.6% in 2019, and the proportion of all cargo aircraft is 51.4%. Both are basically the same. In terms of domestic routes, due to China’s more developed In the passenger transportation network, the proportion of abdominal cargo in domestic routes is much higher than that in international routes, which is about 70%.

However, the new coronary pneumonia epidemic has completely broken the situation in which the abdominal cabin and the full cargo aircraft each occupy half of the freight.

Affected by the control policy, a large number of passenger routes of our country were suspended, and the capacity of carrying cargo in the abdominal compartment was greatly weakened. Data show that since February, the average implementation rate of air cargo is about 20%, and the supply of abdominal capacity is seriously insufficient.

At the same time, the method of all-cargo plane transportation is blessed by policies.

At the press conference of the Joint Defense and Joint Control Mechanism of the State Council held on March 29, the relevant person in charge of the National Development and Reform Commission stated that there are currently 173 all-cargo aircrafts in China, accounting for only 4.5% of China’s civil aviation transportation fleet; 10 companies, including 6 state-owned companies and 4 social capital companies, have a very small share compared with 55 airline companies. 'my country encourages the deep integration of airlines and logistics companies, accelerates the introduction of cargo planes, and supports specialized aviation logistics companies with all-cargo aircraft fleets to settle in airports.'

M&A and restructuring usher in opportunities

'The attributes of air freight determine that it must carry a small volume, high value-added or time-sensitive goods. The cost of all cargo aircraft is high, and not all logistics companies have the ability to participate.' April 1, A brokerage analyst who declined to be named said in an interview with Time Weekly.

As of now, only three express companies, China Post, SF Holdings and Yuantong Express, have set up their own fleets in the field of air cargo, with 33, 58 and 12 own cargo planes, respectively.

The above-mentioned analyst pointed out to the reporter of Time Weekly that the large expenses brought about by the purchase and maintenance of the aircraft have been reflected in the financial reports of SF Holdings and Yuantong Express.

The annual report shows that in 2019, the asset-liability ratio of SF Holdings is 54.08%, a year-on-year increase of 5.73%. In Yuantong Express's semi-annual report for 2019, the cost of 'other industries' was 190 million yuan, accounting for 1.58% of the total cost, while this index was only 8900 yuan in the same period in 2018.

In this regard, Yuantong Express explained that it was mainly due to the increase in costs brought by the growth of the air cargo business.

'For express companies that want to go overseas, it may be a better choice to rent a full cargo aircraft.' The aforementioned analyst told the Times reporter.

In fact, the development of the domestic air cargo market still has a large gap with developed markets such as the United States.

Yang Daqing told the Times reporter: 'A company like FedEx has more than 700 freight fleets around the world. Therefore, it is an inevitable trend to increase investment in the construction of the air cargo market including Air China, China Eastern Airlines and China Southern Airlines.'

In the air cargo industry, airlines are still a role that cannot be ignored.

'Traditional air cargo space is getting smaller and smaller, and it has been losing money in the past few years. High-end logistics is the direction of the future.' Lin Zhijie told a reporter from Time Weekly.

'The advantage of express delivery companies lies in the better link between the aviation and ground transportation links. From door-to-door delivery to door-to-door delivery, they can provide one-stop transportation services. Traditional cargo aviation is good at air transportation, mainly for freight forwarders and express delivery. There is basically no service, ground links and customer service.'

The freight business accounted for a small proportion of the airline's revenue, and often only had a 'fraction' of passenger revenue, and it continued to be in a state of loss.

Taking China Southern Airlines (600029.SH) as an example, the data shows that in 2019, China Southern’s passenger revenue reached 138.5 billion yuan, an increase of 8.17% year-on-year, while the operating income of freight and postal services was only 9.61 billion yuan, a decrease of 4.1 year-on-year. %.

The executive meeting of the State Council held on March 24 pointed out that my country's international air cargo capacity has obvious shortcomings. Due to the impact of the epidemic, the international airline passenger belly cargo has dropped significantly, which has a greater impact on the international supply chain of our industry. It specifically mentions that we should encourage the joint reorganization of air cargo companies and logistics companies.

Yang Daqing pointed out that aviation logistics companies such as Air China and China Eastern Airlines, as well as private express airlines such as SF Airlines and Yuantong Airlines, will be the beneficiaries.

'The high threshold and high risk of the air transport market determine that the main enterprise must use capital leverage to expand. The possibility of large-scale mergers and acquisitions in the domestic market is unlikely. Express airlines can take this opportunity to expand the territory of overseas acquisitions, while traditional airlines There are also many policy advantages. For example, China Eastern Logistics will promote mixed ownership reform, which will be a very good trend.' Yang Daqing told a reporter from Time Weekly.