We have now heard from two separate sources that the grounding of Shenzhen-based all-cargo carrier Jade Cargo International is about to be made permanent, with an announcement expected this week. Cargo Facts’ Asia editor Sam Chambers offers his take on the matter:
Jade Cargo risks liquidation, Cargo Facts can exclusively reveal, as restructuring falters. The 2004-founded Shenzhen carrier, in which Lufthansa Cargo was a joint-venture partner along with Shenzhen Airlines, suspended operations last December as volumes dwindled. Restructuring negotiations were started quickly, and on 29 February Jade’s investors (which now included Air China, following that carrier’s acquisition of Shenzhen Airlines) signed a Letter of Intent with privately-held logistics firm Uni-top Group, outlining a Uni-top takeover.
Uni-top owns Wuhan-based all-cargo carrier Uni-top Airlines, and Jade was seen as an ideal expansion platform. However, according to a well placed source involved in the restructuring, after more than three months of asset investigation and negotiations, the deal is near collapse. “The dominant party of this restructure is Bank of China, which is also the biggest creditor of Jade Cargo,” the source revealed, adding: “Currently the total assets of Jade Cargo is around RMB3.4 billion (US$534 million), but the total liability is now standing at RMB4.5 billion (US$707 million). The restructuring cost is out of control, and if there is no good solution, Uni-top may give up on the deal.”
Jade’s fleet includes six 747-400ERFs, of which three are owned, and three are leased (two from Amentum, one from AWAS). Five of the six are parked at Shanghai Hongqaio Airport, while the sixth is parked at Shenzhen. No public announcement has been made about their fate in the event of a Jade liquidation, but We note that one of them (35171, the AWAS-owned unit), is in the process of being re-registered as N558CL — an American registration.
Sad news, although really not surprising. If I recall correctly, the airline started off on the wrong foot. The JV was founded in October 2004 when the air cargo market in China was booming. Jade management, aiming to achieve high goals, ordered six Boeing 747-400ERFs – that time the latest and biggest top of the line freighters with a list price value of $1.3 billion.
Jade Cargo operation was started in 2006, but they did not have a sufficient number of licensed Chinese pilots. As there was also a shortage of pilots in Asia, Jade could not recruit pilots from other Asian airlines. Jade was therefore forced to ground its brand-new 747-400ERFs in Shenzhen, as there were no pilots to fly them. Revenues did not come and the aircraft lease payments cost millions every month to Jade. Well, with this starting, and considering the fragile and highly vulnerable global economic, Jade business was not “pathway full of roses”. It would not be so much a surprise if Jade goes into liquidation.
In my opinion, Jade Cargo not only started operating on a wrong foot but also wrong time when the economy was not in full swing followed by worst economic crisis hiiting trade after one currency trading “Euro” did not take off well with Europe. Secondly Jade Cargo with Lufthansa management did not spend much time and required energy to investigate pros and cons in the very second year of its dwindling revenue figures but changed schedules now and then thereby affecting market confidence. Finally India routing to Europe was fairly compensatory revenue for the past losses but then Jade Cargo introduced Vietnam sector to share loads was a miserable failure of vision. No doubt most freighter carriers operating ex-India are in trouble with revenue but finally at the end of the day “Survival of the fittest: is the best proverb duly applied to cash strapped Jade Cargo.