Cathay Pacific Airways will take full ownership of its cargo joint venture, Air Hong Kong (AHK) by purchasing the remaining 40 per cent it doesn’t already own, from its partner DHL Group, the Hong Kong-based carrier said in a stock exchange filing on Friday.
As a result Air Hong Kong – whose primary customer is DHL Express – will become a wholly owned subsidiary of Cathay. The stock exchange filing did not detail the cost of DHL’s 40-per cent stake.
The filing did say that AHK would continue to operate a freighter network to destinations in Asia for DHL and would receive agreed service fees and reimbursement of operating expenses.
In addition to purchasing DHL’s stake in AHK, the statement said that DHL would purchase eight A300-600F freighters and associated equipment from AHK, and lease them back to the cargo carrier. This will continue DHL’s role as not only Cathay’s customer, but business partner as well, through the leasing and purchase of block space.
AHK will sell space on its freighters to DHL on an agreed network of overnight routes for initially 15 years starting January 2019, Cathay said. Air Hong Kong currently operates an express freight network to 12 destinations in nine countries, including China, Japan, Malaysia, Philippines, Republic of China (Taiwan), Singapore, South Korea, Thailand and Vietnam. Aside from the eight A330-600Fs, the carrier also operates two A330-600RFs (increased range) and two B747-400BCFs.
Cathay Pacific chief customer and commercial officer Paul Loo said: “We are pleased to announce the signing of a Memorandum of Understanding and look forward to continuing our fruitful commercial relationship with DHL.”
In 2007, DHL and Cathay came to an agreement that AHK would sell space to DHL on an agreed network of flights. Both this agreement and the joint venture agreement governing the company will expire on 31 December 2018. This latest agreement will take effect on the expiry of the existing arrangements.
Cathay Airways has been struggling in the face of rising competition from mainland Chinese and gulf carriers which saw it post a net loss of HK$575 million in the financial year 2016, only the third year it posted a loss in its 70-year history.
But with mainland China as its backyard – and a cargo joint venture with Air China – the carrier continues to expand its cargo business, in part driven by the ongoing boom in e-commerce in the region, despite recently doing away with the role of cargo director.