overview
Kong Dong: “the cargo market in China should develop quicker than the passengermarket”
The Shanghai air cargomarkets have been heavily penetrated by international cargo transportation giants such as UPS and DHL,which have their own cargo stations in the city.Meanwhile, a newShanghai-based joint venture cargo company between Beijing-based Air China and Hong Kong’s Cathay Pacificwillmake competition in the nation’s financialmetropolis evenmore intense. Air China and Cathay Pacific signed a framework
agreement on 25 February to forma cargo airline. The two companies are taking Air China Cargo, the wholly-
owned subsidiary of Air China, as the platformfor the new carrier. Air China got 1.5 billion yuan (US$ 219.6million) fromthe state to buy out the 49 percent stake it did not own in Air China Cargo. Under the joint venture agreement, Air China Cargo is still the subsidiary of Air China, which holds a 51 percent shareholding of the venture. In the new deal, Cathay Pacific will directly subscribe 25 percent equity capital and hold another 24
percent economic rights and interests of Air China Cargo by loan returns provided by an overseas trust company. In total, Cathay is forking out 1.67 billion yuan ($244.5 million) for the tie-up and the company will sell four converted Boeing aircraft and two auxiliary engines to Air China Cargo. “The equity restructuring of Air China Cargo is helpful,
first, through introducingmore aircraft to expand the fleet and build amore efficient platformfor further development, and second, to improve competitiveness
2 AIR LOGISTICSCHINA 4
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