Lufthansa, Shenzhen Airlines ink cargo deal
By Chen Hong (China Daily)
Updated: 2004-10-22 08:51

Leading global cargo carrier Lufthansa Cargo and the growing Chinese carrier Shenzhen Airlines finalized an agreement yesterday to form an all-cargo joint venture airlines after nine months of negotiations.

Shenzhen Airlines takes a controlling 51 per cent stake in the joint venture, which is named Jade Cargo International, while Lufthansa Cargo holds 25 per cent, the maximum for a single foreign investor in a joint venture of this kind as Chinese policy regulates.

They are partnered with Deutsche Investitions-und Entwicklungsgesellschaft, a leading European development finance institution, which takes the remaining 24 per cent.

Headquartered in Shenzhen,the location of China's fourth largest airport and the heart of the country's most prominent manufacturing centre, Jade Cargo International is expected to come into operation after the 2005 Chinese Spring Festival, said General Manager Rudolf Tewes.

"Jade Cargo Internationals' operations will be governed by rigorous cost discipline and flexibility combined with high quality," Tewes said after the contract signing ceremony yesterday.

"We will focus clearly on airport-to-airport general cargo for our target customer group -intra-Asia and globally active forwarders," he said.

The new cargo carrier will initially serve domestic destinations and intra-Asian routes to countries such as India, Malaysia and Singapore with two Airbus A300-600 freighters. In a second phase, it will extend its route network to destinations beyond Asia such as Europe and the United States.

The three parties plan to invest a total of US$90 million in the joint venture. Currently, US$30 million is ready as registered capital funded by the three parties in accordance with their stake distribution in the joint venture.

Yang Yuanyuan, director of the General Administration of Civil Aviation of China, said Jade Cargo International is China's first real air cargo joint venture, and is an independent operation from its investors and also has advanced management by experts from Lufthansa Cargo.

Jade Cargo International will have its own badge, fleet, routes and structure.

"The founding of Jade Cargo is a milestone in the Chinese aviation industry, a further step in the internationalization of the Chinese air cargo business," said Yang.

The establishment of Jade Cargo International comes at a time when domestic carriers have strategically developed cargo business after recording thinner profits from their passenger businesses.

China's air cargo business has maintained double-digit growth for years and total volume is expected to reach 2.6 million tons this year, Yang forecast, compared with last year's nearly 2.2 million tons.

Demands for air cargo transport are increasing because of China's flourishing processing industry and the export surge in value-added, high-tech products, Yang said.

Shenzhen Airlines, a small carrier with total assets of just 6 billion yuan (US$727.2 million), compared to Air China's 51.5 billion yuan (US$6.2 billion), claims to have made profits for the past eight consecutive years.

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