August 30, 2018 / 1:42 PM / 3 months ago

UPDATE 1-Air China plans to sell cargo stake, H1 profit rises

(Updates with Air China and China Eastern’s results)

SHANGHAI, Aug 30 (Reuters) - Air China Ltd said it would sell a 51 percent stake in Air China Cargo to a sister unit for 2.44 billion yuan ($357 million) to focus more on its passenger unit, as it reported a 4.3 percent rise in first-half profit.

China’s flag carrier said in a Thursday statement that while Air China Cargo’s profitability had improved, intensifying competition, exchange rate fluctuations and the complicated international trade situation had created many uncertainties.

“Therefore the sale of Air China Cargo is the company’s strategic and rational response to the air cargo market’s uncertainties, to strengthen the stability of the company’s operations,” it said.

After the sale to the unit Capital Holding, which it said was fully-owned by Air China’s controlling shareholder China National Aviation Holding Company, Air China will put more of its resources into its passenger aviation business to improve its competitiveness, it added.

Air China Cargo’s other shareholders, including Hong Kong’s Cathay Pacific Airways, have priority to purchase the stake or sell their shares with Air China, but the companies have yet to waive or exercise those rights, the company said, adding the deal still had be approved by shareholders.

The deal comes as Beijing has been implementing mixed-ownership reforms aimed at bringing private sector money into government-run companies in an effort to revamp the country’s bloated and debt-ridden state sector.

A document issued by Beijing last week showed that China National Aviation Holding Co was seeking private partners for a logistics mixed-ownership reform project valued at 10 billion yuan.

Last year, Air China’s rival China Eastern Air Holding sold almost half of its freight unit to four firms including Legend Holdings and Global Logistic Properties (GLP) in what was then the Chinese aviation sector’s first mixed-ownership reform deal.

Air China also on Thursday posted profit attributable to shareholders of 3.47 billion yuan for January-June, versus 3.33 billion yuan in the same period last year. Revenue rose 12 percent.

It was helped by factors such as stronger cargo revenues as well as improved performance at its associates and joint ventures including Cathay Pacific, which earlier this month reported a narrower first-half loss.

In a separate statement, China Eastern Airlines Corp Ltd , the country’s second-largest carrier by passenger numbers, said its first-half net profit attributable to shareholders fell 47.5 percent as a weakening yuan and rising oil prices partially offset the impact of growing traveller demand.

($1 = 6.8300 Chinese yuan renminbi)

Reporting by Brenda Goh; Editing by Sunil Nair and Mark Potter

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