Monday, June 6, 2016

Who is the Yiqian Trading Company?

Over the weekend, Hahn Airport (twenty-odd miles west of Frankfurt) was bought.

For the last two years....Hahn has been a problem airport....under the threat of sale.

In the 1950s....the Americans came and made Hahn into a major Air Force installation.  The runway was one of the longest in Europe (12,467 feet long). At one point in the 1980s....they had three squadrons of F-16s there and within the footprint of Hahn were 13,000 military and dependent personnel.

The negative to the US operation there?  Well....this was one of the most rural installations that you might find for any US military operation in Germany.  While it's true that you could drive for 35-to-45 minutes and reach some real city (like Mainz or Wiesbaden), there really wasn't much around the exterior of the base.  Added to this thrilling situation....some of the more extreme weather in winter, with some terrible fog episodes which would develop and make life miserable there.

So in 1991, it was fairly easy for the Air Force to make the decision to shut down Hahn.  The German government evaluated various options and ended with some deal where FRAPORT (the Frankfurt Airport) ended up with ownership.  In 2009.....FRAPORT took it's ownership and sold it to the Rhineland Pfalz government for roughly one Euro (yeah, it is a bit shocking).  There's some debt  episode tied to the deal and it seems like FRAPORT got covered in some way for its debt (120 million Euro is mentioned).

Why dump Hahn from the FRAPORT plan?  No one ever says much.  Maybe the angle for the cargo business didn't play out....maybe the infrastructure costs was too much.....maybe the passenger trade couldn't be increased.

Eventually, the Pfalz government ended up with a deal with the Hessen state gov't.  They kept hoping that cargo business would improve (it didn't).  By the middle of 2015, it was apparent that a deal would have to be made and just dump the airport.  Bidders mostly came from China, Asia and Amazon.

In the end, the Yizian Trading Company won the deal.  So you might ask.....who the heck are they?

They come under the leadership of Liu Yizian.  He started out in life as a taxi-driver who was aggressive on making deals, and knew how to take risks.  He is considered one of the top twenty businessmen of China today.  Typically....his deals don't fail.

How will Yizian make use out of Hahn?

The old base is fairly sizeable.  There's ample room to add more pavement and depot buildings.  From the front gate area is highway 50 which runs east-west, and is roughly a 20-minute drive over to A61 which cuts through the middle of Germany and could take you to Hamburg or Munich....or into Frankfurt in a matter of 40 minutes.

If your plan was to have an import-export operation of a massive size, and have a cargo delivery schedule of forty-odd planes a day landing at Hahn with clothing, bags, etc....which operates on a distribution system throughout all of central Europe (France, Germany, Austria, Switzerland, etc), then this makes absolute sense.  But it also means aggressive marketing and puts the Yizian team at the same level of Amazon in less than five years.

Did the Pfalz and Hessen lose on their investment deal of Hahn?  Yes.  But to be truthful....once FRAPORT decided that they couldn't make anything out of this should have been obvious that a state-owned operation wasn't going to make much success out of this either.  The Yizian operation?  They are fundamentally about taking on risks and getting paid back for that risk.

So once they deliver a cargo at Hahn....what exactly do you think will be there for the return trip?  German wine, German cheese, German high quality ties, etc.  Some Chinese guy will show up at a wine depot and swing some deal for forty pallets of 6-Euro bottles of wine, which will be packed up and taken by airplane to China....where it'll be sold for 16 Euro a bottle and bought by upper-class Chinese guys trying to impress their Chinese girlfriend.  Then the guy will whip out some German-made fancy watch which was also carried as cargo and he paid the equivalent of 2,000 Euro for the gift to impress the girlfriend.

It may take three years, but this might be one of the major success stories in the region by 2020.


Hubert Hollerich said...

Good article! But wine, my friend, will be transported by rail on the new freight train route between Luxembourg and China that opens next year.

R Hammond said...

When these cargo planes arrive from China, with various Chinese make any real profit, they have to have European-made goods on board that will easily resell in China. The problem I see with return on this idea is that there is already the Hamburg to China railway link, and this Lux to China is set for 2017. Freight wise, it leaves one wondering what's left that you might move by aircraft. Or perhaps this is all done for passengers only and Yiqian will make it's profit that way?

I sat and watched four busloads of Chinese tourists arrive....dumping off people at a popular tourist spot in Heidelberg last month. Ten years ago? You might have been lucky to see one single bus like this in a whole month. Maybe the entire Yiqian gimmick to this deal is Chinese tourism and even own the incoming airport itself.