China Southern Airlines is planning to set up a cargo subsidiary in the second half of this year after bringing in foreign strategic partners.

The move by the airline with the country's biggest fleet follows similar steps by two other big carriers, Air China Ltd and China Eastern Airlines. They have already set up cargo units to tap a market valued at 3.1 million tons last year.

Guangzhou-based China Southern will upgrade its present cargo department and turn it into a separate company, the carrier said.

"We are in talks with potential strategic investors to set up a cargo joint venture," said Xu Jiebo, the carrier's vice general manager.

"China Southern would take a controlling stake."

Cargo carriers in Europe and America are preferred partners, as China Southern hopes to use their overseas networks to ensure fully loaded return flights, he said.

Many domestic carriers can't pick up enough freight on their return legs due to the lack of overseas affiliates, Xu said.

Some 70 percent of China Southern's cargo business is now restricted to the domestic market.

"We hope the partnership will help us extend our international business," Xu said.

The company now has two Boeing 747 freighters and is planning to shift six Airbus 300s into cargo operations.

Air China Cargo Airlines, owned by Air China, and China Cargo Airlines, a subsidiary of China Eastern, are now the country's two biggest.

Last year, Chinese airlines carried 3.07 million tons of cargo - a figure that should double by 2010, according to China's General Administration of Civil Aviation.

Among other market entrants, Great Wall Airlines Co Ltd, a joint venture between China Great Wall Industrial Group and Singapore Airlines Cargo, a unit of Singapore Airlines, is scheduled to receive an air cargo business license tomorrow.

(Shanghai Daily May 25, 2006)