China's Air Cargo Merger Raises Questions

China's three largest air cargo carriers will reportedly merge their operations to form Asia's largest freight transport company, Xinhua news agency quoted a senior official at the Civil Aviation Administration of China as saying. However, senior executives of Air China Cargo, China Cargo Airlines and China Southern Cargo are either unaware of the merger or decline to comment.

Earlier this week, CAAC deputy administrator, Zhou Laizhen was quoted on the website of People's Daily, the official newspaper of the ruling Communist Party, as saying that the companies were pushing ahead with the merger. However, the report did not specify any timeline or valuation for the deal.

Surprising news
Asked to comment on the plans, Titus Diu, the chief operating officer of Air China Cargo said that he was not aware of the development. "I have never heard of this news," he said. Likewise, the CAAC declined to comment, while calls seeking comment from China Cargo Airlines and China Southern Cargo went unanswered.
Air China Cargo is a joint venture freight project between Air China and Cathay Pacific, while China Cargo Airlines is a venture between China Eastern and China Ocean Shipping, and China Southern Cargo is part of China Southern Airlines.

Huge airport development program
In a related development, Reuters reported that China will spend RMB500 billion (US$80 billion) on nearly 200 domestic aviation projects this year alone. The report was based on the transcript of remarks that were given by Li Jiaxiang, head of China's regulatory authority at a Beijing aviation forum this week.
The funds will go toward 193 aviation infrastructure improvement projects across the country, Li said. Although he did not provide details on any specific projects, Li said that reason for the funding was to meet growing travel demand and provide a boost to the sagging Chinese economy.

China’s aviation enjoys unabated growth
Despite the economic slump, China's aviation sector has grown rapidly in recent years, thanks to a spectacular growth in e-commerce and a rapidly expanding middle class which is traveling the world more than ever before.
Currently, Chinese airlines now fly 553 routes to 127 cities in 51 nations, Li said. Over the coming summer and autumn months, CAAC estimated that another 83 routes will be added. Between now and 2020, the number of airports in China will grow from about 200 today to 240.

Nol van Fenema

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