China East­ern, Singapore Air com­bine Shang­hai cargo car­ri­ers to boost hub

The Pak Banker - - Company& -

BEI­JING: China East­ern Air­lines Corp., Singapore Air­lines Ltd. and part­ners agreed to com­bine three air-cargo car­ri­ers to bol­ster their pres­ence in Shang­hai, China's busiest air freight cen­ter. China East­ern, Singapore Air's cargo unit, a unit of Tai­wan-based EVA Air­ways Corp. and China Ocean Ship­ping (Group) Co. will in­vest a to­tal of 2.05 bil­lion yuan ($307 mil­lion) in China Cargo Air­lines to sup­port the takeover of two other freight car­ri­ers, ac­cord­ing to a Hong Kong stock ex­change state­ment to­day.

China East­ern is con­sol­i­dat­ing freight op­er­a­tions fol­low­ing the takeover of Shang­hai Air­lines Co. to strengthen its pres­ence in Shang­hai, where the com­pany is based. The move will help the car­rier com­pete with a Cathay Pa­cific Air­ways Ltd. and Air China Ltd. cargo ven­ture that's due to start ser­vices by Dec. 31.

"Man­ag­ing one com­pany rather than three will help save costs," said Kelvin Lau, a Hong Kong-based an­a­lyst at Daiwa In­sti­tute of Re­search. "Ex­ports are still in the grow­ing phase for China and im­ports are also do­ing quite well."

China may be­come the world's largest ex­porter and sec­ond-biggest im­porter by the end of the year, with to­tal for­eign trade of $2.9 tril­lion in 2010, Xin­hua News Agency said Dec. 16, cit­ing Chi­nese Com­merce Min­is­ter Chen Dem­ing.

China East­ern, the nation's sec­ond-biggest car­rier, will in­vest 1.05 bil­lion yuan in China Cargo and hold a 51 per­cent stake, while China Ocean Ship­ping (Group) Co. will put up 348.5 mil­lion yuan for a 17 per­cent stake. Singapore Air's cargo unit and Con­cord Pa­cific Ltd., a unit of EVA Air­ways, will each in­vest 328 mil­lion yuan in ex­change for a 16 per­cent stake apiece.

China Cargo, which will ac­quire the as­sets of Shang­hai Cargo Air­lines and Great Wall Air­lines, will have reg­is­tered cap­i­tal of 3 bil­lion yuan fol­low­ing the re­struc­tur­ing. Prior to the new ar­range­ment, the com­pany was owned by China East­ern and Cosco Group.

Shang­hai Cargo was formed as a 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. China East­ern fell 3.2 per­cent to HK$3.60 as of 12:21 p.m. in Hong Kong trad­ing, while Singapore Air gained 0.5 per­cent to S$15.16. Cathay fell 1.6 per­cent to HK$21.85.

Growth in China has en­cour­aged FedEx Corp., the sec­ond-largest U.S. pack­age-ship­ping com­pany, to add two new ser­vices link­ing China and the U.S., and Hong Kong's Cathay to boost freight ca­pac­ity from next year. Cathay's cargo ven­ture with Air China will give the car­rier ac­cess to freight hubs in Shang­hai and Bei­jing.

Air­lines in the Asia-Pa­cific re­gion are fore­cast to post a com­bined profit of $7.7 bil­lion this year, the high­est of any re­gion, led by growth in China, the In­ter­na­tional Air Trans­port As­so­ci­a­tion said Dec. 14. Global freight traf­fic at Asia-Pa­cific air­ports in­creased al­most 23 per­cent in the first 10 months of the year, ac­cord­ing to the Air­port Coun­cil In­ter­na­tional. The surg­ing traf­fic may help Cathay sur­pass Korean Air Lines Co. as the world's biggest in­ter­na­tional air-cargo car­rier this year. Hong Kong, which neigh­bors the Pearl River Delta, China's main man­u­fac­tur­ing hub, is on course to sur­pass Mem­phis, Ten­nessee, as the world's busiest air-cargo air­port this year. Mem­phis is the home to FedEx's main hub.

In a sep­a­rate news item, Jet­star, the bud­get unit of Qan­tas Air­ways Ltd., makes its first Singapore-Mel­bourne flight to­day, mark­ing the be­gin­ning of its chal­lenge to Singapore Air­lines Ltd. on long-haul routes. The car­rier sold 210 tick­ets for the 8:50 p.m. flight, in­clud­ing 24 in busi­ness class, Si­mone Pregel­lio, a spokes­woman, said to­day. The low-fare air­line will op­er­ate the daily seven-hour flight us­ing an Air­bus SAS A330-200 that can carry as many as 303 pas­sen­gers. Jet­star may base as many as four A330s in Singapore by the end of next year, as it adds flights to Auck­land in March and pos­si­bly ser­vices to north Asia and south­ern Europe later in 2011, Jet­star Asia Chief Ex­ec­u­tive Of­fi­cer Chong Phit Lian said to­day. The car­rier is tout­ing fares 30 per­cent cheaper than ri­vals as it seeks to lure trav­el­ers from full-ser­vice car­ri­ers.

"Com­pe­ti­tion will in­crease and this will put some pres­sure on Singapore Air," said Kelvin Lau, a Hong Kong-based an­a­lyst at Daiwa In­sti­tute of Re­search, who has an 'out­per­form' rat­ing on Singapore Air. "There will al­ways be peo­ple who will want the cheap­est fares."

Jet­star of­fers one-way flights to Mel­bourne from S$428 ($327), in­clud­ing taxes and sur­charges, it said in its e-mail. The car­rier's pas­sen­gers have to pay an ex­tra S$20 if they want to take check-in bag­gage, ac­cord­ing to its web­site.

Singapore Air is run­ning a pro­mo­tion on its web­site of­fer­ing re­turn flights to Mel­bourne from S$818, in­clud­ing bag­gage, taxes and sur­charges. Pas­sen­gers buy­ing these tick­ets have to travel this month and re­turn in late Jan­uary.

Singapore Air, which op­er­ates 21 weekly re­turn flights be­tween the city-state and Mel­bourne, wel­comes and ad­vo­cates com­pe­ti­tion, Ni­cholas Ionides, a spokesman, said in an email re­ply to Bloomberg ques­tions. -Bloomberg

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.