Air China Cargo plans to introduce two additional freighters this year as it focuses on expanding its transpacific route to North America, as well as to Europe, Air China Cargo managing director for marketing & sales, Wang Hongyan told Payload Asia on thesidelines of the Air Cargo China event.

“The plan is to introduce two flights per year, step-by-step, long haul with wide-body freighters to Europe and the US,” Wang said, adding that the aircraft would likely be conversions of B747 aircraft drawn from the passenger side.

The cargo division currently serves 14 international destinations and operates seven B747-400 freighters, as well as having substantial belly hold capacity from the passenger airline’s diverse fleet of 264 aircraft comprising Airbus, Boeing and Tupolev aircraft including three B747-400s and five B747-400 Combies. The passenger side also has orders for 151 aircraft, as at February 2010, which includes 15 B777-300ERs and 15 B787-800s.

In 2009 Air China Cargo saw 45 per cent of its cargo volumes carried aboard its freighters with the 55 per cent generated from the passenger bellies. But in the first half of this year, the percentage has equalised to 50:50, according to Wang. “The trend of development for the cargo division is to increase the percentage of the freighter volumes. If we can lower the dependence on thepassenger side we have more flexibility so we want to increase the freighterpercentage so we can control our future.”

Cathay JV
The carrier is currently awaiting approval from the Chinese government on its proposed joint venture with Cathay Pacific to set up a Shanghai-based cargo joint venture. First mooted in 2006 the 51:49 per cent Air China-Cathay was formalised in February this year and will be operated under the Air China Cargo brand.

Under the deal, Cathay is investing some RMB1.7 billion (US$250 million), and transferring four B747-400 freighters to the joint venture. Wang noted that the JV will only be partial in the beginning as Cathay will still operate at least ten freighters themselves.

“Complete integration will also go step-by-step. Full merger of the two company’s cargo activities is the ultimate plan,” according to Wang. “Currently there are two brands and two cargo teams, but ultimately there will be only one brand and one cargo team.” He could not specify a precise timeframe, but instead said it would be a “long term” objective.

Wang said the new JV will take effect from 1 July, barring any questions from government. He added that should it go ahead unimpeded this may be a signal from the government that it is giving a green light for mergers to create larger Chinese carriers.

The Chinese government had earlier, as reported in the May edition of Payload Asia, indicated it wants to see a merger of Chinese cargo carriers to create one major carrier ranking within the top five internationally by 2013. “After we complete the integration of the two companies we will step into the top three,” said Wang when asked if Air China Cargo could meet this strategic objective.

Industry consolidation
“The interpretation from the carriers, is that we think it is a trend to strengthen the competitiveness, but how to integrate and how to merge, nobody can confirm this,” he said noting that it’s both a commercial decision and one that is influenced by the government.

He added that “this trend will not stop and we welcome this kind of trend. It’s a consideration by the government to consolidate all Chinese players into one, but for the details every enterprise has its own situation. For instance at Air China we make money, but maybe for another carrier they lose money, so maybe not everyone wants consolidation.”

He also noted that should the industry continue to pull-out of last year’s recession with carriers returning to healthy profitability, the impetus for integration will be weakened.

China Eastern/Shanghai Air merger
Meanwhile, China Eastern Airlines and Shanghai Airlines Cargo recently announced their merger. China Eastern currently carriers out cargo operations with MD-11Fs, B747Fs and A300Fs in a joint venture with Chinese ocean shipping and logistics giant, COSCO through the brand China Cargo Airlines.

Following the merger between China Eastern and Shanghai Airlines Cargo, there will be two arms to the newly formed company. The first will carry out freighter operations as China Cargo Airlines, based out of Shanghai Pudong airport and the second will consolidate Shanghai Airlines Cargo with China Eastern to offer warehousing services.

Following the merger, the new China Cargo Airlines will be largest Chinese cargo carrier with 20 freighters. Operating to five continents the cargo carrier also sells the substantial belly capacity of both China Eastern and Shanghai’s passenger fleet. China Eastern alone has a mixed fleet of over 235 aircraft with at leastanother 70 on order.