• Fri
  • Sep 19, 2014
  • Updated: 2:20am
BusinessCompanies

Air China and Cathay Pacific inject 2b yuan into cargo venture

PUBLISHED : Friday, 27 June, 2014, 1:04am
UPDATED : Friday, 27 June, 2014, 1:04am

Air China Cargo, a joint venture between Air China and Cathay Pacific since 2010, will see its registered capital rise 62 per cent to 5.2 billion yuan (HK$6.5 billion) following a capital injection of two billion yuan announced yesterday.

Air China, which owns 51 per cent of its cargo subsidiary, will pour in one billion yuan in cash and other assets. Cathay's 49 per cent stake in Air China Cargo consists of a 25 per cent equity interest held by subsidiary Cathay Pacific China Cargo Holdings and a 24 per cent economic interest through the returns on loans it provides to Fine Star, Air China Cargo's third shareholder. It will inject 500 million yuan in cash through the former and 480 million yuan in cash through Fine Star.

Cathay said in 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 349 million yuan in 2013.

Andrew Orchard, an 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 rumours or concerns that they would potentially shut down the operation altogether."

He said it was revealed to analysts at a recent briefing that the joint venture has been causing losses of as much as HK$50 million per month for Cathay.

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