China Southern Airlines, the largest mainland airline by passenger volume, will establish an air cargo joint venture with Air France/KLM. The joint venture will be registered by the end of this year, Liu Shaoyong, the chairman of the Guangzhou-based carrier, said yesterday at a press conference.
He said the venture would be based either in Guangzhou or Shenzhen, depending on offers by the two airports on handling charges. It is an important step for the internationalisation of the airline, said Daiwa Institute of Research transport analyst Kelvin Lau. Air France bought 25 per cent of China Southern's catering unit last year. Mr Lau said the two airlines could have closer ties in the future, including a direct stake holding.
During the National People's Congress last month, Mr Liu suggested a giant state-owned airline holding company was needed in China.
The recent merger between Northwest Airlines and Delta Air Lines in the United States added further urgency to discussions about the need for consolidation among mainland airlines. The merger was predictable after September 11 hit the airline industry hard in the US, Mr Liu said.
However, he refused to elaborate on his views on consolidation among mainland carriers. In addition to Air China, it seems China Southern wants a leading role in the consolidation, Mr Lau said. In a bid to bolster China Southern, Mr Liu last month called for a capital injection of 40 billion yuan from the government.
However, Beijing has not responded, he said. Last year, the carrier reported a net profit of 1.9 billion yuan, up from 188 million yuan in 2006. For the first quarter of this year, it posted almost 800 million yuan in net profit, compared with a 188 million yuan loss in the same period last year. Excluding a 1.5 billion yuan foreign exchange gain, the carrier incurred an operating loss due to high jet fuel prices and interest expenses. The airline said it would hedge 20 per cent of its fuel purchases this year. 
