Cathay/Air China cargo joint venture receives government approval

China’s National Development and Reform Commission (NDRC) granted permission to Air China and Cathay Pacific Airways to go ahead with their long-planned all-cargo joint venture. The jv was originally announced in mid-2006, as part of a complicated share realignment deal involving Cathay, Air China, China National Aviation Company, CITIC Pacific, and Swire Pacific. When the dust settled, Cathay had taken full ownership of local rival Dragonair, and Cathay and Air China had substantially increased their cross-shareholding.

The all-cargo joint venture, however, was put on the back burner, where it stayed for almost four years, until the carriers signed an agreement in February of this year finalizing the deal. But even with the carriers ready to go in February, the venture remained stalled, awaiting regulatory approval from the Chinese government. With approval from the NDRC in place, the only remaining hurdle is anti-trust approval from the Commerce Department – which appears likely to be given soon, allowing operations to begin in the fourth quarter.

Under the agreement, Cathay will buy a 49% stake in Air China’s cargo arm AIR CHINA CARGO. Cathay said it would fund its RMB 1.67 billion (US$244 million) investment “with the injection of four Cathay Pacific Boeing 747-400 Converted Freighters (BCFs) and two spare engines.” These four 747-400BCFs will be added to Air China Cargo’s existing fleet, which is made up of seven 747-400Fs (a mix of production units, BCFs, and BDSFs), and one Tu-204C (in storage at Tianjin). For its part, Cathay operates six 747-400Fs, thirteen 747-400BCFs (including the four earmarked for the jv), and six 747-400ERFs, and has ten 747-8Fs on firm order with Boeing. The joint venture will operate under the Air China Cargo name, from that carrier’s current bases in Beijing and Shanghai.