EVA buys stake in Chinese cargo unit

EVA Airways Corp (長榮航空) announced yesterday it is buying a 25 percent stake in Shanghai Airlines Co's (上海航空) cargo unit to expand its cargo market.

The statement was released after EVA Airways' board on Monday approved the US$3.88 million investment in Shanghai Airlines Cargo International Co (上海國際貨運航空).

EVA Airways, the nation's second-largest carrier, has filed an application for approval of the Chinese deal with the Investment Commission, the statement said.

"The migration of Taiwan's manufacturing industry to China has significantly reduced the volume of cargo of Taiwanese carriers ? but the current capacity in China cannot meet the huge demand," EVA Airways said in the statement. "The investment will help EVA Airways further extend its network."

Shanghai Airlines would hold a 55 percent of the joint-venture, said Katherine Ko (柯文玲), an EVA Airways public relations official.

Ko said she understood that Shanghai Airlines is looking for another investor to take the remaining 20 percent.

EVA Airways, however, may have held more than 25 percent in Shanghai Airlines Cargo.

The General Administration of Civil Aviation of China said last December that Shanghai Airlines had applied to establish Shanghai Airlines Cargo with Samoa-based Sino Prime Ltd and Juniper Estate BV registered in the Netherlands, with a capital of 124.05 million yuan (US$15.5 million).

Reports in the Beijing Morning Post, Oriental Morning Post and other Chinese media indicated that Sino Prime and Juniper Estate, which control a 25 percent stake and a 20 percent stake in Shanghai Airlines Cargo respectively, are in fact units of EVA Airways.

Last September EVA Airways' parent company, Evergreen Group (長榮集團), also said it would invest 90 million yuan for a combined 45 percent of Shanghai Airlines Cargo.

Chinese aviation regulators cap an individual foreign investor's stake in a Chinese carrier at 25 percent.

There has been speculation that EVA Airways invested in the cargo company via the two companies to evade the regulation.

Ko, however, denied that Sino Prime and Juniper Estate were divisions of EVA Airways.

Shanghai Airlines Cargo -- which is based at Shanghai Pudong Airport -- has applied to operate flights on a Shanghai-Mumbai-Frankfurt route in October, but a confirmed launch date is on hold, pending approval from the Investment Commission, Ko said.

Shanghai Airlines Cargo's fleet includes one McDonnell Douglas MD-11 plane and two Boeing 757-200 freighters, Ko said. Another MD-11 and one Boeing 747-200 will join the fleet by the end of the year, she said.

EVA Airways is not the first Taiwanese carrier to tap the fast growing market.

Last December China Airlines Ltd (華航) acquired a 25 percent stake in Yangtze River Express Airlines Co (揚子江快運), a unit of Hainan Airlines Co (海南航空).

Shares of EVA Airways fell NT$0.2 to close at NT$13.40 on the Taiwan Stock Exchange yesterday.