Air China and Cathay Pacific Airways will sign an air cargo venture agreement by 26 February, said a China Daily report citing three people familiar with the negotiations in Beijing. According to these contacts, Air China will inject seven freighters into the venture, while Cathay will put in five or six planes.

The carriers plan to form the Shanghai-based venture as Chinese exports to the US and European markets are starting to rebound. Shanghai is China’s most important cargo centre, said Jack Xu, an analyst at Sinopac Securities in Shanghai, and the move should help the partners challenge China Eastern, which last month acquired Shanghai Air.

Shanghai Pudong International Airport currently accounts for more than 60 per cent of China’s international air cargo, of which more than 70 per cent is handled by overseas carriers.

Talks between the two airlines started in 2006, when it was announced that Beijing-based Air China would own 51 per cent of the new cargo venture, with Cathay owning the remaining 49 per cent.

In the first half of 2009, Cathay Pacific Cargo suffered a 20 per cent fall in tonnage at Hong Kong International Airport, although demand picked up in the second half of the year. The improvement has been carried over into 2010. Last month, Cathay and its sister carrier Dragonair carried a total of 144,000 tonnes of cargo and mail, up 25 per cent on the same month in 2009.

Air China is Cathay’s second-largest shareholder with a 30 per cent stake. Cathay Pacific owns 18 percent of Air China, the nation’s largest international carrier.