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The obscure property company will take a 35 per cent stake in the first foreign-invested freight carrier

An obscure Hong Kong-based property company will take a 35 per cent stake in China's first foreign-invested - and privately owned - cargo airline, Jetwin Air Cargo.

East Pacific Holdings' unlikely coup represents another small step forward in the slow liberalisation of China's aviation sector.

Jetwin will operate domestic feeder routes linking second-tier mainland cities to larger hubs. The airline will be based in Zhuhai - giving  the city's grossly underused white elephant airport a small boost - and Shanghai's Pudong International Airport.

'We see business opportunities in moving air cargo between small cities and major hubs in China. Most international airlines do not have an extensive network on the mainland,' Jetwin assistant general manager Duan Lian told the South China Morning Post yesterday.

'We filed an application to the CAAC (Civil Aviation Administration of China) in 2000 and approval was granted in December [last year]. We hope the airline can begin to provide services in the first half of next year.'

Mr Duan said the carrier had booked three B737 freighters in preparation for its launch. In its initial stage, Jetwin will provide services between the Pearl and Yangtze river deltas, Beijing, Dalian, Xiamen and smaller cities in southwest China.

'[Jetwin] has been given two years to prepare for operations,'  a CAAC executive said. 'We will grant it an operational licence after it pulls together its fleet, hires crew and prepares all documentation.'

East Pacific's partner in the venture, which will have registered capital of 100 million yuan (HK$93.72 million), is another  obscure property company of mainland origin - China Aidi Group, which will hold a 65 per cent stake.

According to a source close to China Aidi, its management has close connections with high-ranking central government officials and is familiar with China's  developing aviation industry.

'[China Aidi] has strong political connections. It has been considering establishing an airline since 1998,' the source said.

However, the source added that Jetwin had  problems in securing landing slots in Pudong - one of the busiest airports in China. 'Pudong is always congested and its landing fees are high. [Jetwin] is still negotiating with the airport for a better price. It is one of the reasons why operations have been delayed,' he said. 'The carrier is also considering other alternatives, such as Hongqiao airport in Shanghai.'

Jetwin will add two aircraft in its second year of operation and expand its fleet to 10 planes in six years' time.

If Jetwin begins operations on schedule, it will be  the third freighter airline on the mainland after China Cargo Airlines and  express carrier Yangtze River Express.

Air China recently signed an agreement with Beijing Capital International Airport and Hong Kong's Citic Pacific to establish a cargo joint venture. But the CAAC executive said it had yet to receive any application from the airlines.

CLSA analyst Liu Yun said  cargo  was currently a  promising area in China's aviation  sector.

According to CAAC figures, domestic and international cargo throughput grew 15.8 per cent last year to 1.98 million tonnes.

But Mr Liu said that Jetwin's strategy of moving cargo to and from second-tiers cities might not be the most lucrative approach. 'Traffic [from smaller cities] will tend towards truck routes,' he said.



HK firm lands China cargo coup