China Eastern, Singapore Air combine air freight carriers to gain stronger foothold in Shanghai mark

CHINA Eastern Airlines Corp and the cargo unit of Singapore Airlines Ltd plus two other companies plan to invest a total of CNY2.05 billion (US$308 million) in China Cargo Airlines to finance the acquisition of two other air cargo carriers, reports Bloomberg.

It said China Eastern will invest CNY1.05 billion in China Cargo in return for a 51 per cent stake, according to a statement filed with the Hong Kong stock exchange.

Singapore Air's cargo unit and Concord Pacific Ltd, a unit of Taiwan's EVA Airways Corp., will each invest CNY328 million in order for both parties to receive a 16 per cent equity interest. China Ocean Shipping (Group) Co. will invest CNY348.5 million for a 17 per cent stake.

The report said that China Eastern is consolidating air freight operations in the wake of wholly acquiring Shanghai Airlines Co. in a bid to boost its presence in Shanghai. "The move will help the Shanghai-based airline compete with a Cathay Pacific Airways Ltd and Air China Ltd cargo venture that's due to start services by the end of the year," it said, adding this arrangement will give Cathay Pacific access to freight hubs in Shanghai and Beijing.

Commenting on this latest development, Kelvin Lau, a Hong Kong-based analyst at Daiwa Institute of Research, was quoted as saying, "Managing one company rather than three will help save costs."

China Cargo, which will acquire the assets of Shanghai Cargo Airlines and Great Wall Airlines, will have a registered capital of CNY3 billion following the restructuring. Prior to the new arrangement, the company was owned by China Eastern and Cosco Group, the report said.

Shanghai Cargo was established as a joint venture between Shanghai Air and EVA Air. Great Wall is owned by China Eastern's parent, Singapore Air and Singapore investment company Temasek Holdings Pte. China Eastern already manages operations.
(Source:www.schednet.com)