Air China to receive US$220 million in state funds

THE Central Government in Beijing has approved a capital injection of CNY1.5 billion (US$219.66 million) into national flag carrier Air China from its controlling shareholder China National Aviation Holding Co, making it the third mainland carrier to receive government funds.

This comes after China Eastern Airlines received CNY9 billion and China Southern Airlines was awarded CNY3 billion in 2009.

Air China said in a statement that it will "use the capital to acquire a minority stake in its cargo unit, Air China Cargo," reports China Daily.

It noted that this development takes the Beijing-based carrier one step closer to realising its goal of finalising an air cargo joint venture with Cathay Pacific Airways by the end of June.

"Air China is steadily moving forwards on a cargo joint venture with Cathay Pacific. The air cargo market is expected to improve this year as demand from the US and Europe recovers. There is no better time than this to start the joint venture," Li Lei, an aviation analyst with CITIC China Securities, was quoted as saying in the report.

Launched in 2003, Air China Cargo initially had three shareholders, namely Air China with a 51 per cent stake, CITIC Pacific Ltd with a 25 per cent equity interest, while Capital Airports Holding Co held the remaining 24 per cent stake.

The carrier has since become a wholly-owned unit of Air China after the airline bought out CITIC Pacific in January 2008 and Capital Airports in April 2009. The report cited the airline as saying, "With these acquisitions now completed, the CNY1.5 billion injection will be used to replenish Air China's working capital."

Talks between Air China and Cathay Pacific to establish an air cargo joint venture in Shanghai began in 2006. The joint venture is expected to begin operation by June 30, according to earlier comments made by Huang Bin, Air China's board secretary, the report said.

It pointed to earlier media reports as saying that Air China will have a controlling 51 per cent stake in the joint venture, while Cathay Pacific will hold a 49 per cent stake.

(Source: www.schednet.com)