Plans by Luxembourg-based freighter service operator Cargolux to set up a Chinese joint venture all-cargo airline, provisionally named Cargolux China, appear close to getting the go-ahead.

Speaking to Asia Cargo News during a press briefing in Luxembourg on September 29, Cargolux president and CEO Dirk Reich said talks about the project with the European carrier’s Chinese 35% shareholder HNCA (Henan Civil Aviation Development & Investment Company) were “advancing.”

“Those discussions are still ongoing and nothing has been finalized yet but we hope that by the end of this year we will have the contractual basis to start activities,” he reported.

As evidence of the progress being made, Reich revealed that a week earlier, Cargolux had held its first-ever board meeting outside Luxembourg in Zhengzhou, which would be the Chinese home hub for the planned new airline. “We had a very constructive meeting,” he reported. 

Reich said current thinking envisaged starting operations with three B747 aircraft (either -400Fs or -8Fs), with a subsequent increase to five over the following three years. Those aircraft, he said, would be acquired from outside the existing Cargolux fleet and could be either new or second hand.

Asked whether in that context the joint venture partners might look at bidding for three B747-400Fs previously operated by failed Chinese carrier Jade Cargo which are due to be auctioned off in October, Reich said it would be “unwise to close our eyes” to that possibility. However, he added, the timing of that sale might be a little premature for the planned new airline and “at this stage, I would rank the probability that we will purchase those aircraft as very small”. 

In terms of market coverage, Reich said Cargolux China’s main initial focus would be on China-US routes. “Some 60-80% of the capacity of the first three aircraft will be operated in the transpacific market, with the remainder deployed on intra-Asian routes.” Longer-term, he said, as more aircraft joined the fleet, services linking China with Australia, South America and Africa would be added.

Reich said there were no plans for the airline to operate domestic services within China. “However, there is an intention to link the international services with existing domestic flights operated by local express carriers using smaller aircraft such as B737Fs to service the growing e-commerce market in China.”

Asked how Cargolux China hoped to succeed where other apparently similar joint ventures had failed, notably the Jade Cargo operation set up by Shenzhen Airlines, German carrier Lufthansa Cargo and German financial institution DEG which ended up being liquidated in 2012, Reich said there were some significant differences in the way the planned new airline would be organised.

In particular, he suggested that Jade’s sales structure had resulted in it competing with Lufthansa rather than co-operating with it. “I think it was a big mistake putting two airlines together so we do not plan to do that – we have Henan province, HNCA and Zhengzhou airport (as partners with Cargolux). There is no other airline involved so there will be no conflicts of interest.”

In that context, Reich confirmed Cargolux would be the exclusive worldwide cargo general sales agent for the proposed new Cargolux China airline, working in the same way as it already did for established Italian joint venture carrier Cargolux Italia. 

Another key lesson learned from Jade’s problems, added Reich, was the need to have sufficient pilots available when operations started. “Jade had the aircraft but not enough pilots. We are already looking into that issue now.”

By Phil Hastings

Europe Correspondent