Cathay Pacific to sell four B747-400s to new Shanghai-based Air China Cargo venture

Air China Limited stated (08-Apr-2010) it would consider, at an EGM on 29-Apr-2010, a number of resolutions related to the increase of Air China Cargo's registered capital. Details include:

• Capital contribution: As part of this proposal, Cathay Pacific, through its wholly owned subsidiary, Cathay Pacific China Cargo Holdings, and Fine Star (wholly owned by CNAC which itself is a subsidiary owned by Air China), will make a capital contribution of approximately CNY852 million (USD125 million) and CNY238 million (USD35 million), respectively;
• Ownership structure: The capital contributions will result in the following shareholding structure of Air China Cargo: 51% being held by Air China, 25% by Cathay Pacific China Cargo Holdings and 24% by Fine Star (compared to 75%, 0% and 25%, respectively, currently);
• Use of capital: Air China Cargo will use the capital contributions and cash generated from its business operations or commercial bank loans to purchase freighter equipment from Cathay Pacific and Dragonair;
• Fleet plans: Air China Cargo plans to purchase four B747-400BCFs and two spare engines from Cathay Pacific (or its wholly owned subsidiary, Dragonair) for a consideration of approximately CNY1.9 billion (USD282 million). Air China Cargo currently handles all of Air China's cargo capacity with seven B747Fs and also procures and sells the cargo bellyhold space provided by Air China's passenger services;
• Board of Directors: Following completion of the Transaction, the Board of Directors of Air China Cargo will have seven directors, comprising four directors (including the Chairman) appointed by Air China and three directors (including the Vice-Chairman) appointed by Cathay Pacific China Cargo Holdings;
• Additional agreements: As an ancillary agreement in relation to the transaction, Air China, Cathay Pacific and Air China Cargo agree that Air China Cargo will be exclusively responsible for the sale of bellyhold space of Air China's passenger aircraft and that Air China and Air China Cargo will enter into an exclusive sale agreement accordingly;
• Reasons for transaction: The establishment of the cargo airline joint venture based in Shanghai will enable Air China Cargo to capture the air cargo business opportunities of the important and competitive Yangtze River Delta region, and will enable Air China Cargo to deliver better services to satisfy the increasing demand for cargo services in Mainland China. [more - EGM notice] [more - Full Proposal] [more - Cathay EGM notice] [more - Cathay Full Proposal]