China to see major cargo airlines merger?

China Southern Cargo Stansted Airport water Salute 20 June 2015

China Southern Airlines declined to confirm Chinese government media reports of a merger between the carrier’s cargo arm, Air China Cargo andChina Cargo Airlines, but tells Air Cargo Week (ACW) the topic is, “very hot”.

According to the state news agency Xinhua, Air China Cargo, China Cargo Airlines and China Southern Cargo are in talks to join forces.

China Southern Airlines, director of cargo industry and alliance, Yuhua Lin, tells ACW: “It (the merger) is very hot recently, but not confirmed. Therefore no comment.” The other two carriers were not available for comment.

In the report by Xinhua there was no timeline or valuation given for the merger. The Civil Aviation Administration of China’s (CAAC) deputy director, Zhou Laizhen, is quoted at the China Civil Aviation Development Forum, which took place in Beijing from 24-25 June, as saying work on the merger is being, “actively pushed”. This year, China and the Asian region as a whole have seen economic growth slow and airlines are seeing a slowdown in cargo growth. Demand for cargo is now growing at a modest rate compared to previous years.

According to data on CAAC’s website, airfreight volumes have continued to rise in China and in the first quarter (Q1) the country’s airports handled 3.1 million tonnes of cargo, a YOY rise of 4.6 per cent. China Southern Cargo has its main hub in Guangzhou (China) and continues to expand its freighter services. On 20-21 June it launched new cargo routes to London Stansted Airport and Paris Charles de Gaulle Airport using a Boeing 777 Freighter. On arriving at Stansted, China Southern’s freighter was met with a water salute.

Speaking at the Stansted launch on Saturday 20 June, China Southern Cargo’s senior vice president for cargo, Zhao Fengsheng, tells ACW the carrier’s focus is to, “provide more services to customers,” and grow cargo volumes. He did not mention anything to ACWabout the merger with other cargo carriers in China. Last year, China Southern Cargo’s revenue freight tonne kilometres (RFTK) reached five billion, up 16.8 per cent on 2013. It carried 1.4 million tonnes of cargo, up 12.2 per cent.

In Q1 of 2015, Air China Cargo, which is a joint venture between Air China and Cathay Pacific Airways, reported capacity, in available freight tonne kilometres (AFTK), as increasing by 21.4 per cent year on year (YOY) to 2.8 billion. Cargo traffic in RFTK rose YOY by 25.4 per cent to 1.4 billion.

January to April this year, China Cargo Airlines, which is a joint venture between China Eastern and the China Ocean Shipping Company, reported RFTK increased YOY by eight per cent to 1.2 billion.

China is set to develop its aviation infrastructure to boost its flagging economic growth and strengthen its trade infrastructure. The Xinhua news agency reported on Wednesday 24 June that CAAC is investing about 500 billion yuan ($81.7 billion) in 193 domestic projects this year.