The long-awaited air-cargo joint venture between the Chinese mainland and Taiwan will be set up in Shanghai soon.
But the outbreak of SARS has forced the partners to postpone a board meeting, which was scheduled to be held in Shanghai in June. Luo Zhuping, secretary of China Eastern Airlines, said this yesterday. He confirmed that China Airlines got the nod from the State Council in April.
China Airlines signed a framework agreement in September 2001 to take a 25 per cent stake of China Cargo Airlines - the first mainland airlines specializing in cargo transportation. China Cargo Airlines is 70 per cent held by China Eastern and 30 per cent by COSCO.
The agreement was submitted to the Taiwan authorities in the same month, but the approval took 15 months.
The State Council granted approval to China Airlines on April 11 this year, four days before the six-month deadline set by the Taiwan authorities.
"Anyway, it's a fruitful result even though it has taken one and a half years to complete," local aviation insiders said.
With China Airlines as a partner, China Eastern will decrease its share to 55 per cent and COSCO's share will be reduced to 20 per cent.
China Airlines will invest in the venture in cash, Luo said.
"But due to the put-off of the board meeting, its capital has not been in place," he said in a phone interview with China Daily yesterday.
China Airlines will fund the venture with loans of US$47 million from the European Export Bank, Xinhua News Agency was quoted as saying.
Thus, the venture's registered capital will rise to 1.5 billion yuan (US$181 million), Luo said.
China Cargo, set up in 1998, has registered capital of 500 million yuan (US$60 million).
A financial manager of Beijing Office of China Airlines said: "The joint venture has set a precedent for further aviation co-operation between the mainland and Taiwan."
He said the new joint venture will target the market in Europe and the United States rather than the route between Shanghai and Taiwan.
Wang Huayu, chief representative of the office, said China Airlines shows strong interest in the Yangtze Delta, the mainland's most potential cargo market.
"The venture will be able to export more goods from the region to the US and Europe," Wang said.
Sun Zongli, deputy general manager of China Cargo, said: "It's a mutual benefit for the two airlines, with China Airlines elbowing its way into the mainland's air market and China Eastern expanding its world-cargo market."
China Cargo now has three MD-11 air freighters, plus a Boeing-747 'freighter rented from US ATLAS Airlines. It handled 350,000 tons of cargo and mail last year.
"The business has been good in the first five months of this year in spite of the spread of SARS. But it will be uncertain in the second half of the year," Luo said.
According to Sun, the cargo venture plans to add one more MD-11 freighter to its fleet this year and two MD-11 planes next year.
