Struggling Jade Cargo forced to ground 747 fleet

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Chinese-German joint-venture freight carrier Jade Cargo has effectively suspended operations after grounding its six Boeing 747-400ERFs because it can no longer afford to fuel them.

The airline is co-owned by Air China, which holds 51%, and German shareholders including Lufthansa Cargo with 25%.

But a source close to the situation said the six aircraft have been withdrawn from service because the carrier is using its funds to pay financing costs on the jets rather than fuel them.

The situation has been exacerbated by low cargo demand, and the source said the carrier expects the 747s to be out of service for several weeks. Despite the poor financial situation, personnel including the carrier's pilots have been paid.

Discussions are taking place to find a new Chinese shareholder, added the source, because there are increasing signs that Air China is not enthusiastic about continuing its participation.

Lufthansa Cargo had originally founded Jade Cargo with Shenzhen Airlines, and services began in 2006.

But the takeover of Shenzhen Airlines by Air China in early 2010 has left the future of Jade uncertain, particularly after Air China demonstrated strong backing for Air China Cargo, its freight venture with Cathay Pacific, two months ago with plans for a capital injection.

Lufthansa Group subsequently admitted, in late October, that it was looking at the Jade operation carefully as it sought to reduce costs.

A spokesman for Lufthansa Cargo insisted that the company "believes in the future" of Jade and "hoped to find a solution in the next few weeks".

He added that talks were taking place with potential new Chinese shareholders for the Shenzhen-based carrier. Chinese majority owners are required by regulation. Air China could not immediately be reached to comment on the Jade situation.