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China Southern enters cargo JV

By Xin Dingding and Lu Haoting (China Daily)
Updated: 2008-06-04 09:46

China Southern Airlines and Air France-KLM Group yesterday signed a framework agreement to establish a cargo joint venture by the end of this year.

Guangzhou-based China Southern will control 75 percent of the cargo carrier's shares. The Franco-Dutch airline group will hold the rest of the shares and name the CEO.

The new company, likely to be named AE Cargo, is expected to operate at least 10 cargo planes in two years, said Liu Shaoyong, China Southern's president.

Workers load cargo onto a China Southern Airlines plane at Shanghai Hongqiao International Airport. Wu Changqing

The agreement was signed during the International Air Transport Association's (IATA) 64th annual general meeting on June 1-3 in Istanbul, Turkey.

"The framework agreement is an important milestone in China Southern's expedition to improve its competitiveness. The cargo joint venture will make full use of our existing flight network," Liu said.

China Southern, with the country's largest aircraft fleet, was ranked the fourth largest airline in the world in terms of passenger transport volume in 2007, up from ninth in 2006, according to IATA. It transported about 56 million passengers last year.

Of the top-three domestic airlines, China Southern is the only carrier that does not have an independent cargo operation.

Also during the three-day meeting, China Aviation Industry Corp I (AVIC I), the country's leading aircraft manufacturer, said it plans to launch a new 70-seat turboprop aircraft.

"We have finished the initial study on the 70-seat MA700 and are now waiting for government approval to start the project," said Hu Wenming, senior vice-president of AVIC I.

AVIC I produces the 50-seat MA60 turboprop and has received 128 orders. It will present its MA600, an upgraded model of MA60, during the Zhuhai Air Show later this year.

The turboprop market is experiencing a renaissance in Europe and the United States. As fuel consumption, maintenance, and financing costs are low, manufacturers are able to keep operational costs down.

IATA has revised its global aviation industry financial forecast for 2008 as a result of soaring fuel prices. The forecast has been reduced significantly to a loss of $2.3 billion, based on a consensus crude price of $106.5 per barrel. The organization in March forecast an industry profit of $4.5 billion based on an average price of $86 per barrel.

"Oil is changing everything," said Giovanni Bisignani, IATA's director general and CEO.