December 26, 2019 / 8:37 AM / a month ago

China Southern Air Holding sets up one billion yuan cargo company

FILE PHOTO: A China Southern Airlines Airbus commercial passenger aircraft is pictured in Colomiers near Toulouse, France, November 26, 2018. REUTERS/Regis Duvignau

BEIJING (Reuters) - China Southern Air Holding, the parent of China Southern Airlines (600029.SS), 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 prioritizes 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 (600115.SS) sold almost half of its freight unit to four firms, while Air China (601111.SS) last year offloaded a majority stake in its cargo arm in face of market uncertainties.

($1 = 7.0016 Chinese yuan renminbi)

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

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