Companies

Cathay, Air China in cargo venture

By Wang Zhuoqiong (China Daily)
Updated: 2011-05-10 10:41

Joint carrier will serve nation with a fleet of 12 Boeing 747-400 planes

BEIJING - The Hong Kong-based international airline Cathay Pacific Airways Ltd and the Chinese mainland's flag carrier Air China Ltd are tapping into the nation's competitive cargo business with the start of a joint air cargo carrier Friday in Beijing.

Air China Cargo Co Ltd will soon be equipped with a fleet of 12 Boeing 747-400s cargo carriers and will operate principally from Shanghai.

Air China has 51 percent equity interest in the joint venture, while Cathay Pacific Group holds 25 percent equity interest together with a 24 percent economic interest.

The continued strong growth of the Chinese economy has produced one of the world's fastest-growing air cargo markets, generating promising international and domestic business for operators.

In 2010, air cargo in China reached 5.63 million tons, a 26.4 percent year-on-year increase.

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The freight consisted of 3.7 million tons domestic loads, or a surge of 16 percent, and 1.9 million tons of international, a growth of 52.8 percent, according to Civil Aviation Administration of China (CAAC).

In 2010, Boeing Co forecast that over the next 20 years, China's air cargo carriers will add 330 new aircraft to triple the present fleet.

The growth in both inbound and outbound cargo is one of the features that is attracting investors.

"A few years ago, we saw cargo carriers leaving Hong Kong with Chinese exports. But when they returned, they were not full and most of the traffic was agricultural goods such as fresh fruit," said John Slosar, chief executive of Cathay Pacific, during a recent visit to Beijing.

However, in the past two or three years, cargo carriers returning to China have been getting busier with high-value merchandise, such as Prada bags from Milan, he said.

The partnership between Cathay Pacific and Air China will enable the airlines to take advantage of their networks.

"We are different airlines in many ways," said Slosar.

"With Cathay's international network and Air China's domestic network, both of us have seen a great opportunity for learning from each other."

Last year, Cathay Pacific was the world's biggest cargo airline by traffic. By 2010, it operated a fleet of 104 passenger aircraft and 24 Boeing 747 cargo aircraft flying to 141 destinations. Air China has a fleet of 272 aircraft flying to 141 destinations.

Cathay Pacific expects the joint venture will expand its cargo services from its existing service gateway in Hong Kong to another gateway in Shanghai.

"Cathay has spent a lot of time and energy developing its market in Southern China (a major manufacturing base)," said Slosar.

"As China develops, the economy sees more development taking place in the Yangtze River Delta and the western part of the country.

"They (exporters in these regions) won't really use Hong Kong as a gateway for cargo exports, which will help exports flow out of China."

With the geographical expansion of manufacturing in China, such as the development of the western economy and the relocation of factories to Zhengzhou in the central region, the market requires more flexibility to meet the demand wherever the demand takes them, he said.

Industries around Shanghai and the road network along Beijing will serve as a dual center for the cargo company, Wang Changgeng, marketing manager of Air China Cargo, was quoted as saying by Carnoc.com.