The weekly newspaper for air cargo professionals No. 998
10 September 2018
When DG is as simple as ABC
Air China sells off cargo arm in $350m deal
A
ir China Cargo is to be sold off by its parent Air China in a RMB2.4 billion ($350 million) deal, leaving the carrier as a passenger-only operation from this year. The main push for the disposal of the carrier’s 51 per cent holding in its cargo arm is financial - cargo and mail revenue accounted for approximately eight to nine per cent of the total air traffic revenue in the past three financial years. The new owner is China National Aviation Capital Holding, a wholly-owned subsidiary of the stateowned CNAHC (China National Aviation Holding Corporation). It is primarily engaged in managing its state-owned assets and its equity interest in investees, charter of aircraft and maintenance of aviation equipment. The cargo and mail revenue decreased by 1.7 per cent from RMB8,447 million in FY2015 to RMB8,305 in FY2016. The cargo and mail revenue of FY2017 was approximately RMB10,255 million, representing an increase of approximately 23.5 per cent from FY2016 due to the improvement of the air cargo businesses in overseas market. Air China Cargo provides airfreight services in the PRC, with its headquarters in Beijing. As at 31 December 2017, Air China Cargo operated 15 aircrafts with an average age of 10.54 years. As advised by the management of the Company, through the network of the group, Air China Cargo has connections to approximately 18 airfreight routes as at 31 December 2017. Air China Cargo’s other shareholders are Cathay Pacific China Cargo Holdings ,a subsidiary of Cathay Pacific, and Fine Star Enterprises Corporation, which hold 25 per cent and 24 per cent respectively. Each has first refusal rights if CNAHC disposes of any shares in the future. The Air China board of directors point to growing
consumer wealth in China a reason to divest itself of cargo operations. It says: “With the increase in the income of residents, the upgrade of consumption structure, and the increasingly close economic tie among regions, the air passenger transport business maintains stable growth while possessing huge market potential.” According to the board, in recent years capacity in air cargo has been oversupplied. “Market competition was fierce, the cargo transportation price was low, and the market was highly open. In the domestic market, the traditional air cargo businesses do not fully match the rapidly changing domestic logistics needs, and the competition in freight market has increased. “In the international market, despite the increase in international cargo transportation volume in 2017, the entire industry is faced with increasingly
complex international trade situation and exchange rate risks, leading to increased uncertainty in the prospect of the international cargo transportation market,” it said. “Although the profitability of Air China Cargo improved in 2017, improvement was mainly due to the recovery of international transportation volume, cyclical rise of freight rates, and substantial exchange rate gain from the appreciation of RMB against US dollar. “Given the international trade situation and the expected weakening of Renminbi, profitability has not been fundamentally improved. “Disposing of Air China Cargo is the concrete measure and reasonable choice for the company to address the uncertainties of the air cargo market, allowing the company to enhance the stability of its operation.”
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