Air China and Cathay Pacific signed (25-Feb-2010) a Framework Agreement to establish a jointly-owned cargo airline. The two companies will use an existing cargo airline, Air China Cargo Co Ltd (ACC), a wholly-owned subsidiary of Air China, as the platform for the JV. Details include:
- Ownership structure: ACC will continue to be a subsidiary of Air China, which will hold 51% equity in ACC, while the Cathay Pacific Group will acquire a 25% equity interest directly in ACC and fund an offshore trust, in the form of a loan, to hold another 24% economic interest in ACC. The total value of the Cathay Pacific Group’s investment in the JV will be CNY1,669 million (USD244 million);
- Fleet: Cathay Pacific will sell four freighters and two spare engines to ACC, which currently operates seven B747Fs;
- Operating bases: Beijing and Shanghai Pudong;
- Launch date: ACC plans to commence operations in Summer 2010, subject to necessary approvals;
- Executive appointments: The new ACC Board of Directors will have seven Directors, four (including the Chairman) appointed by Air China and three (including the Vice-Chairman) by the Cathay Pacific Group;
- Purpose of the agreement: The JV will enable ACC, established in 2003 and now China's largest all-cargo airline, to "capture the air cargo business opportunities from the important and competitive Yangtze River Delta (YRD) region, while also strengthening its focus on the Pearl River Delta (PRD)", which is Cathay's core cargo business region;
- Network: ACC operates all-cargo services to 14 destinations worldwide and procures and sells the cargo belly space provided by Air China’s domestic and international passenger network. Meanwhile, Cathay operates 25 B747Fs (with belly cargo space on 126 passenger aircraft) on scheduled freighter services to 37 worldwide destinations. [more]
Air China: “Given the solid cooperation foundation between Air China and Cathay Pacific, ACC will fully capitalize on both companies’ existing brand strengths and shareholders’ support, to capture business opportunities, maintain leadership position in the market, and contribute to the development of the Beijing and Shanghai aviation hubs,” Kong Dong, Chairman. Source: Company Statement, 25-Feb-2010.
Cathay Pacific: “We are very excited about this joint venture which further enhances our strong and deepening strategic partnership with Air China. The joint venture airline will provide the two most important cargo-generating regions in the Mainland with two highly competitive and efficient home-based carriers – Cathay Pacific in the Pearl River Delta and ACC in the Yangtze River Delta. Both regions will remain competitive relative to other export zones elsewhere in the world. As a strong home-based cargo airline with a firm foothold in the Yangtze River Delta, ACC will ensure an efficient capture of cargo movements that may otherwise divert to rival hubs in the region. It makes good sense for Cathay Pacific and Air China to team up for this joint venture,” Christopher Pratt, Chairman. Source: Company Statement, 25-Feb-2010.