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 will come as part of a cross shareholding agreement
reached between the two major airlines in June last year and will
thus give wing to 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 had previously been in talks with Shanghai-based China
Eastern Airlines for over six years for the same purpose. But Fan
said the two sides had not reached an agreement.
Analysts said that finding a compromise between both sides had
been a major difficulty in the tie-up negotiations since their
parent companies are China's largest aviation groups, making a
rivalry evident amongst complementary business goals.
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, its
shares opening lower than its IPO price of 2.8 yuan but things
would soon pick up.
The share price rise is mainly due to investors' positive
expectation 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 and its soon to be issued
annual report is eagerly awaited.
"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.
(China Daily January 10, 2007)