Cathay Pacific to buy Air 皇冠体育app Cargo stake

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Cathay Pacific to buy Air 皇冠体育app Cargo stake

(Agencies)
Updated: 2010-02-27 12:17

Cathay Pacific Airways Ltd., Hong Kong's largest carrier, will invest 1.7 billion yuan ($249 million) in affiliate Air 皇冠体育app Ltd's cargo unit as a global economic rebound revives exports in the Chinese mainland.

Cathay will control 49 percent of Air 皇冠体育app Cargo, including a stake to be held by an offshore trust, following the deal, it said in a statement Thursday. The carrier will inject four Boeing Co 747-400 freighters and two spare engines into the unit to pay for the transaction.

Cathay Pacific to buy Air 皇冠体育app Cargo stake

File photo of an Air 皇冠体育app Cargo plane. [Photo/Air 皇冠体育app Cargo]

The airline jumped the most in two weeks in Hong Kong trading as access to hubs in Beijing and Shanghai may allow it to benefit from rebounding overseas demand for Chinese mainland-made auto parts, electronics and clothes. Air 皇冠体育app will get help competing with carriers including FedEx Corp and 皇冠体育app Eastern Airlines Corp that fly freight from 皇冠体育app.

"It's the right time to do this as the cargo market looks pretty good," said Kelvin Lau, a Hong Kong-based analyst at Daiwa Institute of Research. "It's particularly important for Air 皇冠体育app as the carrier needs to win market share in Shanghai."

Cathay and Air 皇冠体育app first proposed a cargo venture in 2006 alongside a larger deal centered on Cathay's takeover of Hong Kong Dragon Airlines Ltd. Volatility in cargo markets over the past two years complicated discussions, Cathay Chairman Christopher Pratt said at a Hong Kong press conference.

Exports Rebounding

"We are very optimistic about the joint venture's success," Pratt said. "Chinese mainland's?exports are already rebounding quite robustly in the last three or four months. Will that continue? We are not sure, but it's a long-term trend."

Air 皇冠体育app is Cathay Pacific's second-largest shareholder with a 30 percent stake. Cathay Pacific owns 18 percent of Air 皇冠体育app, the nation's largest international carrier.

Cathay Pacific may consider increasing its stake in Air 皇冠体育app "when the time is right, when the business is good," Chief Operating Officer John Slosar said in an interview with CNBC Asia.

Cathay rose 2.1 percent to HK$14.42 in Hong Kong Friday. Air 皇冠体育app, the nation's largest international carrier, was suspended in the city and Shanghai pending an unrelated announcement about a possible share sale.

Cargo Fleets

Air 皇冠体育app Cargo operates seven 747 freighters, flying to 14 destinations worldwide, as well as selling cargo space onboard Air 皇冠体育app passenger planes.

Cathay's group fleet currently includes 25 Boeing 747 freighters. The airline is also due to receive 10 new Boeing 747-8 cargo plane from early next year.

Chinese mainland's exports rose 21 percent in January, the second monthly advance after 13 declines. The mainland's air-cargo and mail traffic volume rose 9.3 percent to 4.5 million tons last year and may climb to 5 million tons this year, according to the Civil Aviation Administration of 皇冠体育app.

Global air-freight traffic surged 23 percent in December, the International Air Transport Association said earlier this month.

皇冠体育app Eastern completed the takeover of neighbor Shanghai Airlines Co. last month. The carrier surpassed Air 皇冠体育app as the mainland's No. 2 airline by fleet size following the deal.