Lufthansa Cargo Likely To Pull Plug On Jade Cargo

Jan. 24, 2012

The venture has been dogged by financing problems since the very start and currently needs no less than $64 million of fresh funding to stay afloat

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19 January 2012 - Lufthansa Cargo, a division of German airline Deutsche Lufthansa (ETR:LHA), is expected to pull the plug on Jade Cargo, the Chinese joint venture majority owned by its partner Shenzhen Airlines, German newspaper Handelsblatt said.

Weak demand led to the suspension of Jade Cargo flights around Christmas but operations had been expected to resume at the start of this week. However, Lufthansa Cargo has dispatched letters to Jade Cargo's customers to inform them that the fleet would remain grounded until further notice, Handelsblatt said. Industry sources see this as a harbinger of the venture's demise, the business daily added.

Jade Cargo was set up in 2004 and is 51 percent owned by Shenzhen Airlines. Lufthansa controls 25 percent and 24 percent are held by a subsidiary of KfW, the German state-owned development bank. The venture has been dogged by financing problems since the very start and currently needs no less than EUR50m ($64 million) of fresh funding to stay afloat. Its survival is highly doubtful given Shenzhen Airlines refusal to take part in any financing exercise.