Air China and Cathay Pacific inject CNY2 billion into cargo venture
July 1, 2014 Category Airlines and airports, Logistics
Air China Cargo, a joint venture between Air China and Cathay Pacific since 2010, will see its registered capital rise 62% to CNY5.2 billion following a capital injection of CNY2 billion. Air China, which owns 51% of its cargo subsidiary, will pour in CNY1 billion in cash and other assets. Cathay’s 49% stake in Air China Cargo consists of a 25% equity interest held by subsidiary Cathay Pacific China Cargo Holdings and a 24% economic interest through the returns on loans it provides to Fine Star, Air China Cargo’s third shareholder. It will inject CNY500 million in cash through the former and CNY480 million in cash through Fine Star. Cathay said in an announcement to the Hong Kong stock exchange that the move would provide funds to assist Air China Cargo to adjust its fleet, reduce its operating costs and develop its cargo charter flight business with China Postal Airlines. Air China Cargo, whose principal operating bases are in Beijing and Shanghai, reported an audited net loss of CNY349 million in 2013. Andrew Orchard, Analyst at CIMB securities, said the magnitude of the capital injection was significant. “The joint venture was not doing so well. It’s been loss-making since its inception. This is a signal that Air China and Cathay are going to try to make this work out even though there have been some rumors or concerns that they would potentially shut down the operation altogether.” The joint venture has been causing losses of as much as HKD50 million per month for Cathay, the South China Morning Post reports.
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