CITIC Pacific plans to sell its 25 percent stake in Air China
Cargo clearing the way for a merger between Air China Cargo and
China Cargo Airlines. This would be the biggest such deal in the
nation's cargo sector.
The proposed link up would create a Chinese cargo conglomerate
able to compete with the world's biggest carriers.
Rao Xinyu, board secretary of Air China Ltd, Air China Cargo's
parent company said that CITIC Pacific plans to sell its stake,
"but we haven't reached any agreement yet."
Rao declined to reveal yesterday whether Air China would buy the
stake from the Hong Kong-based company. CITIC Pacific was
unavailable for comment.
By selling its stake in Hong Kong's Dragonair and reducing its
shareholding in Cathay Pacific earlier this year CITIC Pacific has
indicated its intention to pull out of the aviation business.
Launched in 2003 Beijing-based Air China Cargo is 51 percent
owned by Air China with CITIC Pacific holding a 25 percent stake
and Capital Airports Holding Co a 24 percent shareholding.
Air China is widely expected to buy the shares from CITIC
Pacific which could make the cargo carrier's shareholding system
less complicated and pave the way for its merger with China Cargo
Airlines, analysts said.
"Air China should be the natural choice to take over the stake.
The result is that Air China Cargo would have only two shareholders
and that could make the negotiation with China Cargo Airlines less
complicated," said Li Lei, an aviation analyst with CITIC China
Securities.
Shanghai-based China Cargo Airlines, in which China Eastern
Airlines holds a 70 percent stake, was established in 1998 as
China's first company specializing in air cargo transportation.
Shipping firm COSCO holds the remaining 30 percent stake in the
firm.
Facing heated competition from international rivals China's two
leading cargo carriers have been in talks for more than six months
to create an air cargo conglomerate by merging their fleets and
networks.
But finding a deal that suits both sides has proved a major
sticking point during the negotiations.
"Their parent companies are China's largest aviation groups.
Neither side wants to give up its decision-making power," Li
said.?
China Eastern Airlines yesterday declined to comment on CITIC
Pacific's possible sale of its stake in Air China Cargo.
"Whether the two cargo carriers can be merged depends on how to
solve the relationship between the shareholders," said Luo Zhuping,
board secretary of China Eastern Airlines.
With average annual growth of 17 percent over the past decade
China is one of the world's fastest growing air cargo markets. But
due to intense competition and limited capacity Chinese cargo
carriers suffer from poor profitability.
Air China's cargo traffic experienced a year-on-year growth of
15 percent in the first six months of 2006. Its cargo capacity also
increased 14 percent year-on-year. But the average cargo yield
dropped 4 percent compared to the same period in 2005.
(China Daily November 22, 2006)