Companies

Air-cargo carriers agree to combine

By Chan Sue Ling (China Daily)
Updated: 2010-12-21 10:41

Airliners from Singapore Airlines (L) and China Eastern Airlines are seen at the Shanghai Pudong International Airport in this file photo. [Photo / Reuters]

SINGAPORE - China Eastern Airlines Corp, Singapore Airlines Ltd and partners have agreed to combine three air-cargo carriers to bolster their presence in Shanghai.

China Eastern Airlines, Singapore Air's cargo unit, a unit of EVA Airways Corp and China Ocean Shipping (Group) Co will invest a total of 2.05 billion yuan ($307 million) in China Cargo Airlines to support the takeover of two other freight carriers, according to a Hong Kong Stock Exchange statement on Monday. China Eastern Airlines is consolidating freight operations following the takeover of Shanghai Airlines Co to strengthen its presence in Shanghai, where the company is based. The move will help the carrier compete with a Cathay Pacific Airways Ltd and Air China Ltd cargo venture that's due to start services by Dec 31.

"Managing one company rather than three will help save costs," said Kelvin Lau, a Hong Kong-based analyst at Daiwa Institute of Research. "Exports are still in the growing phase for China and imports are also doing quite well."

China may become the world's largest exporter and second-biggest importer by the end of the year, with total foreign trade of $2.9 trillion in 2010, Xinhua News Agency said on Thursday.

China Eastern Airlines, the nation's second-biggest carrier, will invest 1.05 billion yuan in China Cargo and hold a 51 percent stake, while China Ocean Shipping (Group) Co will put up 348.5 million yuan for a 17 percent stake. Singapore Air's cargo unit and Concord Pacific Ltd, a unit of EVA Airways, will each invest 328 million yuan in exchange for a 16 percent stake apiece.

China Cargo, which will acquire the assets of Shanghai Cargo Airlines and Great Wall Airlines, will have registered capital of 3 billion yuan following the restructuring. Prior to the new arrangement, the company was owned by China Eastern and Cosco Group.

Shanghai Cargo was formed as a venture between Shanghai Air and EVA Air. Great Wall is owned by China Eastern Airlines' parent, Singapore Air and Singapore investment company Temasek Holdings. China Eastern Airlines already manages operations.

Related readings:  China Eastern says stake in China Cargo falls  New cargo flight boosts high-tech hub  China Eastern says stake in China Cargo falls  China Eastern to begin seeking investors this year

Growth in China has encouraged FedEx Corp, the second-largest US package-shipping company, to add two new services linking the Chinese mainland and the United States, and Hong Kong's Cathay to boost freight capacity from next year. Cathay's cargo venture with Air China will give the carrier access to freight hubs in Shanghai and Beijing.

Airlines in the Asia-Pacific region are forecast to post a combined profit of $7.7 billion this year, the highest of any region, led by growth in China, the International Air Transport Association said on Dec 14.

Global freight traffic at Asia-Pacific airports increased almost 23 percent in the first 10 months of the year, according to the Airport Council International.

Bloomberg News