China is to have a cargo carrier conglomerate big enough to compete with the world’s biggest carriers. To do this CITIC Pacific plans to sell its 25 percent stake in Air China Cargo. This will clear the way for a merger between Air China Cargo and China Cargo Airlines and the result airline will be world size.

Rao Xinyu, board secretary of Air China Ltd, Air China Cargo’s parent company, said that CITIC Pacific plans to sell its stake although final agreement had not yet been reached.

By selling its stake in Hong Kong’s Dragonair and reducing its shareholding in Cathay Pacific earlier this year, CITIC Pacific has indicated its intention to pull out of the aviation business.

Launched in 2003, Beijing-based Air China Cargo is 51 percent owned by Air China, with CITIC Pacific holding a 25 percent stake and Capital Airports Holding Co having a 24 percent shareholding.

Air China is widely expected to buy the shares from CITIC Pacific, which could make the cargo carrier’s shareholding system less complicated and pave the way for its merger with China Cargo Airlines.

Li Lei, an aviation analyst with CITIC China Securities, said, ‘Air China should be the natural choice to take over the stake. The result is that Air China Cargo would have only two shareholders, and that could make the negotiation with China Cargo Airlines less complicated.’

Shanghai-based China Cargo Airlines, in which China Eastern Airlines holds a 70 percent stake, was established in 1998 as China’s first company specializing in air cargo transportation. Shipping firm COSCO holds the remaining 30 percent stake in the firm.

Facing heated competition from international rivals, China’s two leading cargo carriers have been in talks for more than half a year to create an air cargo conglomerate by merging their fleets and networks.

Li Lei said, ‘Their parent companies are China’s largest aviation groups. Neither side wants to give up its decision-making power.’

With average annual growth of 17 percent over the past decade, China is one of the world’s fastest growing air cargo markets. But due to intense competition and limited capacity, Chinese cargo carriers suffer from poor profitability.

So regard it as a done deal but, as Americans day, not a done done deal. Some details still to be solved.