(Yicai Global) Nov. 3 -- China Southern Airlines is setting up its own air freight company to take advantage of the growing international cargo sector as the grounding of passenger aircraft due to Covid-19 travel restrictions has led to a shortfall of belly space and the need for more dedicated freight planes and services

Preliminary approvals have been granted, the Civil Aviation Administration of China said today. The new company is called China Southern Cargo and it has a registered capital of CNY1 billion (USD150 million).

While the pandemic has brought commercial passenger flights to a standstill, it has driven up demand for the global transportation of medical, epidemic control and other goods. As a result, freight rates between China and foreign countries have jumped significantly.

China Southern Airlines Cargo Logistics, the logistics arm of the carrier’s parent firm China Southern Air Holding, raked in CNY2.64 billion (USD395 million) in net profit in the first eight months of the year on operating income of CNY9.78 billion, essentially staving off disaster.

China Southern may later spin off its air cargo arm and make it part of CSACL, a source told Yicai Global.

In September, CSACL started mixed-ownership reform, which refers to the injection of private capital in stagnating government-controlled businesses to boost competitiveness. It plans to offer up to 15 strategic investors the opportunity to purchase a maximum of 49.5 percent equity.

Editor: Kim Taylor