Air China will set up a Shanghai-based cargo joint venture with Cathay Pacific this year. This despite concerns that are being voiced over the recent strengthening of their cross-shareholding.
Formation of the joint venture will help China’s and Hong Kong’s flag carriers better compete in Shanghai with China Eastern, which will have more than half of the Shanghai market after merging with Shanghai Air.
The new venture between Beijing-based Air China, the world’s largest airline based on market value, and Cathay would come after Air China bought a further 12.5% stake in Hong Kong-based Cathay earlier this month, lifting its interest to 29.99%.
The venture could enhance Air China and Cathay’s southern China air cargo business by handling exports from Shanghai through Hong Kong, Air China’s vice president Fan Cheng told reporters.
Fan Cheng said, "Asset evaluation for the joint cargo company with Cathay is nearing an end, and we are now in advanced discussions on the operation and development of the venture."
He did not disclose any investment terms or the fleet size of the planned company.
Reuters states Air China has just reported strong second-half earnings on Wednesday on fuel-hedging gains but it warned of potential weakness facing the industry.