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China Southern Air May Buy 12 More Boeing Freighters

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PostPosted: Sun Jan 28, 2007 7:01 am    Post subject: China Southern Air May Buy 12 More Boeing Freighters Reply with quote

By Irene Shen
Last Updated: January 26, 2007 05:32 EST

Jan. 26 (Bloomberg) -- China Southern Airlines Co. may order as many as 12 Boeing Co. 777 freighters, costing as much as $2.88 billion, to tap the country's growing air cargo demand, said Deputy General Manager Liu Xiaoxiao.

China's largest airline plans to operate a fleet of 20 freighters within five years, Liu said in an interview today in Shanghai. The airline has two 747 freighters and announced an order for six 777 freighters last year. All of the new freighters will also be 777s, Liu said.

The decision by China Southern, the country's only Airbus SAS A380 customer, to operate an all-Boeing freighter fleet is a further blow for the delayed superjumbo program. Chinese airlines and overseas carriers such as Cathay Pacific Airways Ltd. have added cargo capacity in China as the country's growing exports drive demand.

``Carriers are trying expand in the more profitable cargo business to gain from the economic growth,'' said Jack Xu, an analyst at Sinopac Securities Asia Ltd. in Shanghai. ``The appreciation of the yuan and lower oil prices will allow them to continuing spending on expansion.''

China Southern's yield from carrying cargo is about three times as much as it is for passenger traffic, Xu added. The airline is adding capacity to grab market share, particularly in Guangdong, China's manufacturing hub and richest province. The airline is based in the province, which borders Hong Kong.

Shares of China Southern fell 2.7 percent to HK$3.45 at the close of trading in Hong Kong. Its Shanghai-traded shares rose 5.1 percent to 5.83 yuan.

Air France

China Southern is also in talks with overseas airlines, including Air France-KLM, Europe's biggest carrier, about forming a cargo venture, Liu said. The airline has also spoken to U.S. and Asia-Pacific carriers, he added, without elaborating.

The airline will complete talks on the joint venture within the year, Liu said.

China's airlines boosted their cargo volume 11 percent last year to 3.41 million tons, the aviation regulator said on Jan. 18.

Boeing won orders for 65 widebody freighters last year, while Airbus SAS lost customers for its rival A380 freighter because of delays. China Southern ordered five passenger versions of the plane in January 2005.

A380 Cancellations

FedEx Corp., the largest air-cargo company, canceled an order for 10 A380 freighters last year, while International Lease Finance Corp. dropped plans to take five of the planes because of delays. Delivery of FedEx's first freighter, originally set for 2008, was delayed to 2009 and then pushed back to 2010.

United Parcel Services Inc., the only remaining customer for the freighter, and Airbus are still in negotiations over its order for 10 planes, the airplane maker said on Jan. 19.

The 777 freighter costs as much as $240 million at list prices. Airlines usually pay less than list price for planes, as manufacturers give them discounts.

Cathay Pacific, Hong Kong's largest airline, plans to add six weekly Boeing 747 freighter flights to Shanghai by the end of this month, it said on Nov. 13. The new services will raise its freighter frequency on the route to 18 flights a week.

The airline also plans to set up a cargo venture in Shanghai with Air China Ltd, the nation's largest international carrier. The joint venture will be the largest air cargo operator in China, Xu said.

Deutsche Lufthansa AG, Singapore Airlines Ltd. and other overseas airlines have formed ventures in China as growing shipments of computer chips, mobile phones and electronic goods to the U.S. and Europe boost demand for air freight.
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