Online retailer JD.com says inadequate domestic air cargo services could see the firm set up its own freighter fleet specializing in the delivery of computers, communications and consumer electronic goods. JD is the latest e-commerce company planning to build its own logistics network to overcome the shortcomings of China’s distribution sector. Shanghai-based Shentong Express and YT Express applied for airline operating licenses earlier this year. “Chinese airlines refuse to receive shipments that include lithium batteries because of fire hazard concerns,” said Shi Tao, Vice President of JD, the largest e-retailer for electronic and computer products in China. Most of the computers and handsets it sells are powered by lithium batteries. JD has been approached by SF Express, a Shenzhen-based courier that is already running its own fleet, but the two have not come to an agreement on the charges. Alibaba, the largest e-commerce operator in the world, decided to invest at least CNY100 billion to build its own logistics network. JD received 6.8 million orders online on November 11, three times the average daily sales. That was dwarfed by Alibaba’s 100 million transactions on that day. It took JD nearly a week to clear the backlog. “It’s already a norm in the United States and Europe that logistics companies operate their own fleets,” said Kelvin Lau, Analyst at Daiwa Capital Markets. He added that the new entrants, which focus on the domestic market, could capture the booming e-commerce business in the country. They could therefore distance themselves from the overcapacity problem in the current long-haul freighter market to North America and Europe. Existing freighter operators, however, are doubtful whether the newcomers will succeed. “For those who want to tap into the freighter service, I would urge them to have second thoughts,” said Zhong Wei, General Manager at China Eastern Express, the new express service unit of China Eastern Airlines. “They have to face challenges ranging from high fuel costs, and slot allocation for landing and air rights, just to name a few,” the South China Morning Post reports.

Henan Civil Aviation Development and Investment Co (HCADI), a state-owned company in Henan province, has purchased a 35% stake in Cargolux Airlines International. The total value of the transaction is USD231 million, including the 35% stake in the company and a USD10 million expansion fund. Zhengzhou Xinzheng International Airport will become Cargolux’s second hub globally after the transaction is completed, and the freight carrier will open new routes from Luxembourg to Zhengzhou, the capital of Henan province, with four flights weekly. HCADI will pay an additional USD15 million as a subsidy for the new routes. Cargolux, based in Luxembourg, said in its financial statements that its loss widened to USD35.13 million in 2012 from USD18 million in 2011. The 35% stake, which is now held by the Luxembourg government, was sold by Qatar Airways Co in December 2012. Generally speaking, it is not a good time to buy a stake in a cargo airline, as the global air cargo market has been sluggish in  recent years, analysts said. But this deal is an exception. “Demand for international freight is huge in the province, as Foxconn Technology Group has facilities there,” said Li Lei, Civil Aviation Analyst with China Minzu Securities. Henan’s total foreign trade rose 83% in 2011, when Foxconn’s facilities in the province began operations, according to the local government. In the first three quarters of 2013, the province’s export volume increased 19.3%, or 11.3 percentage points higher than the nation’s average growth, the China Daily reports.

China’s airfreight industry has been suffering since the onset of the global financial crisis in 2008, although it showed some signs of improvement in demand during the first eight months of the year. Liu Jian, Manager of the Cargo Business Department at the Dalian branch of China Southern Airlines, recently visited some cities between Dalian, Liaoning province, and Guangzhou, Guangdong province, to look for more transfer points for his company’s cargo flights. “Connecting flights can take more goods, as each route will be shorter, meaning that less fuel has to be carried,” Liu said. China Southern Airlines, which transports 70% of the seafood originating in Dalian, carried only 4,259 tons of seafood in the first half of the year, 1,000 tons less than in the same period of 2012. “The lost income from the 1,000 tons of seafood possibly represents 5% of the branch’s total cargo income in the whole year,” said Liu. The limited capacity of cargo planes is one of the reasons for the reduction, he added, and having more connecting flights could be a solution. Due to the economic growth slowdown, Chinese airlines’ income from cargo declined, although their freight volumes still went up slightly. Air China yield per ton-kilometer decreased 7.6% to CNY1.58 during the period compared with the first half of 2012, while its load factor still increased 0.38 percentage point year-on-year to 57.26%. China Southern Airlines also had the same problem. In the first half of 2013, it posted CNY2.93 billion in revenue from its cargo and mail business, down 6% year-on-year, while its cargo and mail volume increased 2.3% year-on-year, but the yield per ton-kilometer decreased 8.1% year-on-year. “The cargo demand is still there, but the price is going down significantly,” said Leif Nilsson, Regional General Manager for the Asia Pacific region of Scandinavian Airlines (SAS). “I’m very pessimistic about the airfreight market this year, and I think the market will not recover in the short term,” said Zou Jianjun, Professor at the Civil Aviation Management Institute of China, the China Daily reports.

A prolonged down-cycle in the air cargo market has taken a heavy toll on demand for new freighter aircraft, with Airbus receiving zero orders so far this year. “We will see a pick-up in buying once the surplus in freighter aircraft is absorbed,” Andreas Hermann, Vice President Freighters for Airbus, told reporters at a press conference in Hong Kong. Airlines are now focusing on finding cargo to fill the excess capacity of their existing fleets, and getting rid of old freighter aircraft, rather than on expanding their fleets, said Hermann, who added that he expected equilibrium to be restored as soon as the end of next year. The International Air Transport Association (IATA) reported that total air cargo revenues for the year declined to the level of 2007 – USD59 billion – and to achieve similar revenues carriers had to carry 17% more cargo, while also coping with a 40% rise in jet fuel. Airbus is upbeat on prospects for long-term cargo demand, however, and projects global air freight traffic to grow by an average of 4.8% annually over the next 20 years to more than 500 billion ton-kilometers. Some 80% of the traffic will originate in, or be destined for, emerging markets, while the rest will be between developed economies. Freight traffic from, to and within the Asia-Pacific will grow at the fastest pace of 5.5%. The Asia-Pacific will further dwarf North America as the biggest market when its share of total traffic rises to 41% in 2032 from 36% now, while North American traffic will drop to 24% from 30%. Airbus sold five freighters in 2012 after selling seven in 2011.

Pinky Lai, the first Chinese car designer to make a name internationally, is retiring soon from Porsche, where he has been a designer for 24 years and is currently General Manager of Design for global customers and special projects. He is expected to join a large Chinese car company as Chief Designer early next year. The 62-year-old Hongkonger has had a highly successful career in Europe, working as a designer for Ford and BMW before joining Porsche in 1989, where he was responsible for the exterior design of the Porsche 911’s 996 model – first produced in 1996. Lai also designed the exteriors for the Boxster and the Cayman. He is the first, by a margin of some 20 years, of three Hong Kong-born designers who have gone on to make an impact with Western carmakers. Anthony Lo is now Vice President of exterior design with Renault, while Chelsia Lau is Chief Designer at Ford’s strategic design concepts group in Shanghai. Lai’s intention is to stay at the Chinese car manufacturer for “two life cycles”, which in car industry parlance is about 10 years. During this time, Lai says, he wants to launch a range of cars that will look very different and distinctive. His ultimate goal is to develop a global Chinese car brand. “I have watched for many years as the Chinese car industry has thrown buckets of money out of the window. Although they have hired foreign engineers and designers, they still haven’t been able to develop their own successful brands,” he said. Several designers from Western car companies have already joined the Chinese car industry. James Hope was appointed Corporate Director of Design at Chery Automobile in March last year, and Turkish Designer Hakan Saracoglu, who spent 14 years with Porsche, was appointed Director of Chery’s Shanghai design facility.