One of the Cathay Pacific Boeing 747-400 Boeing Converted Freighter

Air China Cargo Limited and Cathay Pacific Airways Limited have finalized a new joint cargo airline venture with a global mandate. On Monday May 9th,2011, the two airlines officially formed a joint air cargo venture which allotted a 51% equity stake to Air China with a 25% equity interest and 24% commercial interest going to Cathay Pacific Group. The official formation of the new venture carrier was accompanied by the installation of the seven-members Board of Directors. The arrangement permits Air China to designate the Chairman along with three additional board members. Cathay Pacific Group in turn designates the Vice Chairman and the two remaining board members. The new airline which is set to operate out of mainland China’s Shanghai International Airport will use 12 Boeing 747-400 Freighters.

This latest development highlights Air China Cargo’s potential as a dominant provider of integrated air delivery and logistics services in mainland China. Already, the carrier saw freight volume increase by 38.32% to 1.35 million tonnes transported in 2010. The limited number of aircraft that will be available for initial operation (12) will likely combine the 9 Boeing 747-400 Freighter currently operating with Air China Cargo as well as another 3 Boeing 747-400 provided by Cathay Pacific Cargo fleet thus honoring its 24% commercial interest (in fact Cathay Pacific has agreed to sell 4 Boeing 747-400BCF along with 2 spare engines to the venture, one of the aircraft has already been absorbed into Air China Cargo operation as of early 2011). The new venture intends not only to derive increasing market share from the massive flow of manufactured goods supplied by China to the global economy, but also to benefit from qualitative (process) improvements while under Cathay Pacific ‘tutelage’. Cathay Pacific Cargo operates a fleet of 24 Boeing 747-400 Freighters and leads all the global passenger/cargo airlines for widebody cargo operation behind the likes of FedEx, UPS and Atlas Air. In 2010 the carrier saw a 50.1% increase in cargo revenues on 18.1% rise in freight transported to 1.8 million tonnes. In terms of overall efficiency and modernization the carrier scores extremely high with the expected delivery of 6 new Boeing 747-8F this year alone (from a total order of 10 Boeing 747-8F in 2007). Upon building a new state-of-the-art cargo terminal facility at Hong Kong International Airport, Cathay Pacific will also benefit from operating one of the world’s largest cargo handling operation when delivered in 2013. The introduction of the new e-AWB electronic airway bill in Hong Kong further streamlines processes. Naturally Cathay Pacific has been able to appreciate early Air China Cargo obvious strategic advantages; the airline 2010 report points out that “Air China Cargo is based in Shanghai and is in a good position to exploit the attractive air cargo opportunities in the Yangtze river delta region.” On previous entries we already highlighted how Air China Cargo was making deliberate steps to strengthen that position by securing additional market share along Western European (Frankfurt-Dalian, Milan-Chengdu) routes. In 2010 it introduced the innovative Air China Cargo Express product, available on 210 flight routes at 18 destinations that furthered brand differentiation by featuring processing time frame, cargo space protection, operational processes and after-sale services. The new Air China Cargo-Cathay Pacific will also leverage on the 268 passenger aircraft of Air China’s fleet to provide additional cargo capacity on an extended network of 32 countries including 47 overseas cities and 91 domestic cities.

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