In the new Air China-Cathay Pacific cargo deal the details are complex. The main vehicle is Air China Cargo, which is 75%-owned by Air China with the carrier’s parent China National Aviation owning the rest through its Fine Star subsidiary.
Cathay Pacific China Cargo Holdings will take a 25% share of Air China Cargo for $125 million. Fine Star will increase its financial contribution to Air China Cargo with a $38 million injection to retain a 24% share. Air China will still hold the remaining 51%.
In a related transaction a Cayman Islands corporation, Advent Fortune, is to take over Fine Star from China National Aviation. Cathay Pacific will provide an $120 million loan to Advent Fortune, of which $28 million will support Fine Star’s injection into Air China Cargo.
Air China Cargo operates a fleet of seven Boeing 747 freighters and handles the allocation of cargo hold space on other Air China flights. It will use the proceeds from the Cathay and Fine Star investments to purchase four Boeing 747-400 converted freighters from Cathay and Dragonair.
Flightglobal said while Cathay is not downplaying the importance of its Hong Kong cargo hub, the move does mark the growing significance of mainland China in the international cargo market.