China Southern to buy six 777Fs; China Eastern re-launches cargo unit

Boeing 777F. Photo: Courtesy, Boeing.

China Southern Airlines said Tuesday in a widely cited filing with the Hong Kong Stock Exchange that it reached an agreement with Boeing to purchase six 777 freighters valued at $1.58 billion based on list prices, although it noted that it received "price concessions" making the cost "significantly lower" than list prices. Meanwhile, China Eastern Airlines officially relaunched China Cargo Airlines, finalizing the integration of its cargo unit with Shanghai Airlines' airfreight subsidiary (ATW Daily News, July 1, 2010).

CZ said the six 777Fs will be delivered between 2013 and 2015 and "will facilitate the optimization of the structure of the group's cargo business, freighter fleet and cargo traffic capacity."

The 777Fs will enable CZ to boost its cargo capacity 8.4%, it said. Rival CEA is also seeking to buttress its cargo business through the relaunch of China Cargo Airlines, which is based on the assets of CEA's old subsidiary China Cargo Airlines, Shanghai Airlines Cargo International and Great Wall Airlines. The new China Cargo Airlines has a registered capital of CNY3 billion ($463 million). CEA holds 51%, China Ocean Shipping Co. owns 17%, Eva Airways controls 16% and Singapore Cargo Airlines has 16%.

CCA is based in Shanghai and will operate 18 freighters comprising five 747-400Fs, four 777Fs, four MD-11Fs, two 757-200Fs and three Airbus A300-600Fs. It is scheduled to introduce two new 777Fs this year. CEA MD Ma Xulun said the 747-400F and 777F would become the cargo venture's main fleet types by 2015.

Shanghai is the biggest and most lucrative cargo market in China,but it is dominated by FedEx, UPS and DHL rather than domestic operators. In addition to the new CEA carrier, Air China and Cathay Pacific Airways formally launched their SHA-based joint venture cargo operation in May (ATW Daily News, May 12). It is noteworthy that Guangzhou-based CZ has also shifted its cargo base to SHA.