The encyclopedia · Strategy & Leadership · Strategic decision · 2004–2012
Jade Cargo was Lufthansa's China air freight bet — it lasted five years
A joint venture between Shenzhen Airlines and Lufthansa Cargo went bankrupt after a decade of losses, and its 747s ended up on Taobao.
Jade Cargo International · Shenzhen Airlines · Lufthansa Cargo · 2012-06-04
What happened
Jade Cargo International was founded in 2004 as a joint venture between Shenzhen Airlines (51%), Lufthansa Cargo (25%), and DEG (a German state-owned bank, 24%). It commenced operations in August 2006 with six Boeing 747-400ERF freighters, aiming to capture China's booming air cargo market on routes to Europe and Asia. Lufthansa brought operational expertise; Shenzhen Airlines brought China access.
The venture never turned a profit. The 2008 global financial crisis crushed air freight demand just as Jade Cargo was ramping up. By 2010, the partnership was fraying — Lufthansa Cargo attempted to sell its stake, and discussions about funding were described as 'extended' with no resolution. The airline flew its last scheduled flight on Christmas Day 2011 and grounded its entire fleet on New Year's Eve 2011.
A last-minute rescue by UniTop Group fell through when UniTop withdrew its letter of intent in late May 2012. On June 4, 2012, the airline's leadership announced liquidation. The six 747-400ERF aircraft were sold to carriers around the world — three of them were auctioned on Taobao in 2017, an undignified end for a joint venture that had started with Lufthansa's prestige behind it.
Why it happened
- The joint venture bet on China's air cargo growth at the peak of the market, just before the 2008 financial crisis destroyed global freight demand for years.
- Lufthansa Cargo's expertise in European operations did not translate into Chinese domestic cargo routes, where low-cost local carriers had the advantage.
- Ownership was split three ways with no single majority owner willing to absorb losses — each partner had an exit option, and none had a long-term commitment.
- The venture did not shift strategy when the market turned; it kept the same fleet and route structure through years of losses.
The lesson
A cross-border joint venture with no single committed owner will fold as soon as the market turns. Three shareholders with three different agendas is not a backup plan.
Aftermath
The six 747-400ERF aircraft were distributed globally: CAL Cargo Air Lines, SF Airlines, AirBridgeCargo, and Southern Air each acquired some. Three former Jade Cargo 747s were auctioned on Taobao in 2017, with SF Airlines purchasing two for over ¥160 million each. Shenzhen Airlines returned to focus on passenger routes. Lufthansa Cargo continued serving China through its own network.
Sources
- Wikipedia — Jade Cargo International
- FlightGlobal (archived) — Struggling Jade Cargo forced to ground 747 fleet (30 Dec 2011; six 747-400ERFs grounded because the carrier can no longer afford to fuel them; Lufthansa Cargo founded Jade with Shenzhen Airlines and services began in 2006; Lufthansa Group was scrutinising the venture and seeking new Chinese shareholders; live URL dead, Wayback snapshot)
- World Airline News — Jade Cargo goes out of business (12 Jun 2012; closure after UniTop Group decided not to invest; JV split Shenzhen Airlines 51% / Lufthansa Cargo 25% / DEG 24%; operations suspended 31 December 2011)
- Air Cargo News — Jade grounds freighters (20 Jun 2012; all six 747-400ER freighters grounded; cash went to financing costs rather than fuel)
- Air Cargo News — Jade: doomed from the start (26 Jun 2012; the carrier going into liquidation; Shenzhen Airlines identified as the 51% major shareholder; strategy called flawed)
- BBC News — Taobao auction of ex-Jade Cargo 747s (22 Nov 2017; two former Jade Cargo 747s sold to SF Airlines for more than ¥320M in total; a third went unsold; the planes were seized by a Shenzhen court and bankruptcy was filed in September 2013)
- CNBC — Boeing 747 sold in online auction on Alibaba's Taobao (22 Nov 2017; each of the two planes sold for just over ¥162M; the third aircraft attracted only one bidder and went unsold)
- China Daily — SF Airlines receives two auctioned 747s (12 Dec 2017; aircraft B2422 and B2423 handed to SF Airlines at the Shenzhen Intermediate People's Court; auction held 21 November 2017)
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