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Aug. 1 (NBD) -- YTO Express Group Co Ltd (YTO Express, 600233.SH), a leading express delivery firm in China, Monday entered into an agreement to build an aviation logistics hub at Jiaxing Airport, east China's Zhejiang province.

Under terms of the agreement, construction is expected to start this year and the total investment is 12.2 billion yuan (1.8 billion U.S. dollars). However, an informed source told NBD that plus the input in the later period, the figure will likely reach up to 15 billion yuan (2.2 billion U.S. dollars). 

The new deal is part of the logistics company's string of moves in the aviation logistics area. 

In June this year, YTO Express just unveiled its plan to construct a logistics center in Hong Kong in partnership with Cainiao Network Technology Co., Ltd. and China National Aviation Corporation (Group) Limited.  

Building a logistics center in Zhejiang's Jiaxing constitutes a part of the express delivery firm's aviation transportation strategy, as Jiaxing has huge potential for the aviation service development, which is of great significance to the company's construction of aviation transportation network, the above-mentioned source said. 

The Jiaxing hub is set to be put into operation by 2021, and will be YTO Express' global operations base, research and development center and settlement center. 

According to company plan, by 2030, YTO Express aims to have 50 cargo planes at Jiaxing Airport, with an annual air cargo and mail capacity of 1.1 million tonnes. By 2050, the aviation cargo and mail capacity is expected to reach 2.4 million tonnes.

Xu Yong, chief consultant for an express and logistics website, said to NBD it is an inevitable trend to see large express delivery companies turn into comprehensive logistics centers. In the long run, increasing investment in logistics infrastructure construction is helpful to reduce comprehensive costs. 

Industry analyst Zhao Xiaomin agreed with Xu on this, saying the establishment of the aviation logistics hub is an investment for the future, and as long as the hub becomes operational, YTO Express will be in the ascendant in the aviation area. 

However, Zhao pointed out in the meantime it takes a long time to convert the investment into market share, and this means YTO Express cannot afford serious problems in operations during the process, especially in its primary business. 

The logistics firm was under tremendous pressure in recent two years. 

A number of industry insiders once said the company's dominance in the logistics market has slipped. Data shows the company lost out to several rivals in terms of net profits last year despite high revenue. 

Zhao stated YTO Express is still one of the big names in the industry though it was surpassed by ZTO Express by delivery volume over the past two year. Next, its priority is to go all out to stay among the top 3 in terms of both delivery volume and service quality. If it couldn't make it, benefits brought by its enormous investment in the aviation area will be largely compromised.  

Email: lansuying@nbd.com.cn