The Responses of Chinese Dedicated Air Cargo Industry to E-Commerce Boom and COVID-19: Network Development and Services

The Responses of Chinese Dedicated Air Cargo Industry to E-Commerce Boom and COVID-19: Network Development and Services

China has achieved remarkable economic growth from 1978. In recent years, the country has become the world's number two economy and is turning to a consumption-driven orientation with its booming e-commerce market. These circumstances are expected to drive the development of the domestic cargo market and create opportunities for the local integrator in China. However, the industry has been considered inefficient because it is operating with less focus on freight transport compared to passenger one. Especially in the domestic market, cargo delivery highly relies on belly-capacity of passenger traffic which is dominated by combination airlines because of the unbalanced air route network with much higher traffic density in the east coast of China. During 2020 the global pandemic caused by COVID-19 led to most passenger flights being grounded. The crisis raised the importance of networks and services the all-cargo flights.

The rapid developments of the e-commerce markets increased the demands on the air express service industry substantially, and so the air express integrators became the biggest market players. The integrators' networks underwent great development after one year of the COVID-19 outbreak. By comparing their network indices values with ones of the world-leading carriers in the EU, it is found that the EU carriers with their preponderance of hub-and-spoke structures have a higher degree of centralization. In contrast, China's integrators have hub-and-spoke and point-to-point structures, which make the network less centralized and more complex.

It also found that the Chinese scheduled freighter network (CSFN) displayed small-world and scale-free network properties in 2020. The CNT analysis demonstrated that the CSFN is not a random type of network and maintains a good coverage of the nation. The CSFN is unbalanced like the form of the air passenger traffic in relying on three eastern mega-city clusters. However, the network appears to have a clear layering feature consisting of national and intermediate level hubs as well as many small nodes (peripheral cities). The national hubs for the dedicated cargo carriers are Shenzhen in the Pearl River delta, and Hangzhou and Nanjing in the Yangtze River delta for the CSFN, instead of Guangzhou and Shanghai as in the case of China's air passenger ii network. The increase in direct freighter routes among cities such as Wuhan, Beijing, Tianjin and Guangzhou in the early period of the pandemic increased the density and transitivity of the CSFN. Since China's air passenger traffic had quickly restored in the second half of 2020, we argue that the changes in the CSFN during COVID-19 were unlikely to be a result of the substitution effect between freighter and passenger aircraft. It was more likely a result of the higher air cargo demand during the pandemic and airlines' realisation of the importance of freighter operations in China.

To meet the rising aviation demands driven by the development of China's economy, the domestic air cargo network in the coming decades will have strategic development opportunities. The air freight industry will benefit from transforming and upgrading the existing large domestic cargo airports. The trend of the national network development is foreseeable. In the long run, China's domestic air cargo network pattern will be altered to a real hub-and-spoke network by an integrator such as SF Express who will implement its integration strategies to reinforce its advantages in the premium price and Promised delivery time (PDT) service strategies.

A conceptual model with six evaluating dimensions is developed for the air freight express industry in China's e-logistics market. The fields of preferential pricing, customer experience, safety/risk cover and air freight capacity are positively associated with customer satisfaction. When e-commerce firms choose an Air express service provider (AESP), they are more sensitive to cost and after sales service than the operational capacity and the overall industrial performance claimed. Significantly, this suggests that customers expect and value air freight capacity. When an AESP increased its investments in aircraft and airport infrastructure substantially in recent years, these investment projects increased the AESP's competitiveness on the customers' perceived service quality.

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