Air China, the nation's flagship carrier, said yesterday it is
likely to set up a 50-50 cargo joint venture in Shanghai with Cathay Pacific this year.
"We are now
busy preparing for the joint venture program and hope to realize practical
progress in the cargo business partnership with Cathay in the first half of
2007," said Fan Cheng, vice-president of Air China Ltd.
The move is part
of a cross shareholding agreement reached between the two airlines in June last
year and is expected to create the largest cargo carrier on the Chinese
mainland.
"How to significantly improve our cargo transport capabilities
is an important task for Air China in 2007. The establishment of the joint
venture with Cathay will lay a solid foundation for our cargo business," Fan
said.
Air China has been in talks with Shanghai-based China Eastern
Airlines for more than half a year to create an air cargo conglomerate by
merging their cargo units. But Fan said the two sides had not reached an
agreement.
Analysts said that finding a compromise between the two sides
had been a major difficulty in the tie-up negotiations as their parent companies
are China's largest aviation groups.
Air China's A shares yesterday rose 9.97 percent to close at 6.4 yuan. The
carrier had a frosty start to its initial public offering (IPO) on the Shanghai Stock Exchange in August last year, with its shares
opening lower than its IPO price of 2.8 yuan.
The share price rise is
mainly due to the positive expectation of investors for Air China's performance
"in the mid term", analysts said.
"The expectation of lower international
oil prices and further appreciation of the renminbi is good news for the whole airline industry," said Li
Lei, an aviation analyst with CITIC China Securities.
"Another major
boost for investor confidence in Air China is the partnership with Cathay," Li
said, adding that Air China could reap stable revenue of at least 600 million
yuan annually by holding 17.5 percent in Cathay, which is Asia's second-most
profitable airline.
Beijing-based Air China recorded net profit of 3.35 billion
yuan in the first nine months of last year. It will soon issue its annual
report.
"We are confident that our performance in 2006 will break
records," said Zheng Bao'an, the company's board secretary.
Air China's
net profit reached 2.41 billion yuan in 2005, a slight rise of 0.85 percent from
2004.
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