China Eastern Airlines : Southern Air Holding sets up 1 billion yuan cargo company

China Southern Air Holding, the parent of China Southern Airlines, has set up a cargo company with registered capital of 1 billion yuan ($143 million), as it looks to consolidate its air cargo assets through state-led reforms.

The move from December 24 was disclosed by a filing approved on the National Enterprise Credit Information Publicity System and comes as China prioritises implementing mixed ownership reforms to revamp its bloated, debt-ridden state sector.

China Southern is among 96 centrally owned companies supervised by the state assets regulator, the State-owned Assets Supervision and Administration Commission (SASAC).

As such, China Southern Airlines would offload its old freight unit to the newly registered company, according to a statement from SASAC in October. The cargo company would also take over other air cargo assets under the parent company such as belly cargo services, cargo terminals and international logistics.

The cargo business would be managed in a market-oriented way and would become a major source of profits, said the SASAC.

The air cargo market, an economic bellwether linked to global trade, saw its traffic decline by 3.3% in 2019, the International Air Transport Association (IATA) said, driven by a tariff war between the United States and China.

In 2017, China Eastern Air Holding sold almost half of its freight unit to four firms, while Air China last year offloaded a majority stake in its cargo arm in face of market uncertainties.

(Reporting by Stella Qiu and Brenda Goh; Editing by Gareth Jones)

Stocks treated in this article : China Eastern Airlines Corporation Limited, China Southern Airlines Company Limited, Air China Limited, United States Dollar (B) / Chinese Yuan in Hong Kong (USD/CNH)