Air France KLM, Europe's largest airline by sales, is in talks with China Southern Airlines to set up a mainland air cargo joint venture, said Air France chairman Jean-Cyril Spinetta.
"We have been accepted by China Southern Airlines as the only airline it is talking to," Mr Spinetta said.
A China Southern spokesman declined to comment on the talks.
In January, Xu Jiebo, chief financial officer of the mainland's biggest airline, said Air France was neither a preferred nor an exclusive foreign partner for the cargo venture. The two carriers already have a code-sharing arrangement.
Like its mainland rivals, China Southern has been slow to develop its freight business because of a long-standing imbalance between imports and exports.
China's airlines operate only 33 freighters with a combined capacity of 7,700 tonnes. UPS and FedEx, the two biggest dedicated cargo carriers in the US, between them operate 1,000 aircraft.
However, China's strong economic growth has spurred demand for prime air freight commodities such as high fashion, wines and electronic products, prompting Chinese airlines to seek cargo alliances with international carriers.
Shenzhen Airlines has teamed up with Lufthansa to form Jade Cargo Airlines, which operates two Boeing 747s, and plans to expand the fleet to six aircraft by January next year.
Air France recorded a 15-fold increase in freight traffic to 120,000 tonnes in 2005 and last year, from 7,800 tonnes in 1994, with more than 50 per cent of cargo division revenue coming from the Asia-Pacific region.
Mr Spinetta said he also expected continued double-digit growth in passenger traffic from China, where its passenger numbers have increased 20 per cent a year since 2002.
Air France operates 69 weekly flights to Beijing, Chengdu, Guangzhou, Hong Kong and Shanghai. It plans to increase service frequency to Shanghai, and has started using larger aircraft on routes to Beijing, Shanghai and Hong Kong.
Copyright 2005 LexisNexis, a division of Reed Elsevier Inc. All rights reserved.
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