SHANGHAI: Top logistics company DHL announced on Friday the launch of its domestic airfreight service in China, becoming the first international logistics company permitted to operate internally in China.

Logistics firm DHL has become the first international company wholly licensed to operate domestically in China. Wu Changqing

DHL Global Forwarding, DHL's air and ocean freight services unit, has obtained a domestic airfreight license from the China Air Transport Association, said the company, which will allow it to operate between 17 major Chinese cities.

Peter Landsiedel, CEO of DHL Global Forwarding, Asia-Pacific, said the launch of domestic air freight services is a milestone for both the company and the domestic logistics market, now the world's second-largest behind the US.

The market is at present dominated by local companies.

"China has become one of the most significant logistics markets worldwide, with an abundance of open regulations and huge growth potential," said Landsiedel. "The launch of DHL Global Forwarding Domestic Airfreight services is a strategic direction for us to expand westwards into second- and third-tier cities in China."

He said the launch of the service would help the German giant work closely with its customers, especially international clients in the region who are increasingly shifting production to the hinterlands to cut costs.

The company will partner with major domestic carriers such as Air China Cargo, China Cargo Airlines and China Southern Airlines to move domestic air cargo service to 17 cities.

A total of 30 branches or warehouses covering 73 cities will be built by DHL in the next five years, requiring an investment of more than $20 million.

"In the next five years, DHL is projected to be an indisputable market leader in domestic air freight, capturing 10 percent market share and 93 percent network coverage on major domestic airfreight trade lanes," said Steve Huang, managing director, DHL Global Forwarding China.

DHL's move is seen as part of its strategy to strengthen DHL's No 1 position in freight forwarding in China and become a leading player in contract logistics, said Victor Mock, senior vice-president of Greater China, DHL Global Forwarding.

China's domestic air cargo market has become the second-largest in the world with an annual growth rate estimated at 10.8 percent over the next two decades, according to the latest Boeing's World Air Cargo Forecast.

Other top international logistic companies such as US-based FedEx and TNT are also planning to offer domestic airfreight service but it will be difficult for them to obtain licenses without establishing joint-ventures with local companies, said Derek Chen, vice-president of China Cargo Airlines Ltd.

Market analysts said the entry of DHL is expected to change the landscape of the market as a whole.

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