September 1, 2010
Firms receive green light from the Chinese National Development & Reform Commission.
by Damian Brett, IFW
Air China and Cathay Pacific Airways have received permission from the Chinese National Development and Reform Commission (CNDRC) to establish an air cargo joint venture.
According to reports, Air China revealed on Monday that the two companies had received the go-ahead to launch the JV from the CNDRC, but the airline still needed permission from the Ministry of Commerce.
The two airlines initially announced they were forming a JV in February of this year, with a launch date pencilled in for this summer.
However, it is taking longer than anticipated to get the new firm off the ground and a new start date is now planned for the fourth quarter of the year.
The JV will see Air China Cargo take control of four Cathay Pacific B747 freighters. It will offer international services from Shanghai and Beijing, with a particular focus on developing its share of the Yangtze River Delta market.
Air China’s existing cargo airline, Air China Cargo (ACC), will be the platform for the JV. Upon completion of the transaction, Air China will hold 51% of ACC, while the Cathay Pacific group will acquire a 25% equity interest and fund an offshore trust, in the form of a loan, to hold the other 24%.
The total value of the Cathay Pacific group’s investment in the JV will be around Rmb1.7 billion (US$249m).
The four Cathay freighters would be delivered to ACC in stages over the second part of this year, and are likely to be deployed on main routes to and from North America, Europe, Japan and Taiwan.
The JV partners established a strategic cross-shareholding relationship in June 2006, under which Air China invested in Cathay Pacific, and Cathay Pacific doubled its holding in Air China and assumed 100% ownership of Dragonair.