South Korea's largest flag carrier Korean Air Co. entered into an agreement with Sinotrans Air Transportation Development Co., Ltd. to set up a two-decade cargo joint venture in North China's port city of Tianjin on December 5.

The venture, with total registered capital of USD 14.91 million, will be mainly responsible for the operation of a cargo transportation station in Tianjin Binhai International Airport.

Under terms of the agreement, Korean Air will take a 47% stake in the venture with an investment of USD 7.01 million; and Sinotrans Air, a 63%-owned subsidiary of China's largest logistics company Sinotrans Limited (SEHK: 0598), will pick up a 20% stake with an investment of USD 2.98 million.

Air Korea, a low-cost airline established by Korean Air to aim at international routes, will take a 15% stake with an investment of USD 2.24 millioon and Hanjin Transportation Co., one of the largest transportation and logistics companies in South Korea, will chip a 10% stake with an investment of USD 1.49 million.

Tianjin Dongli Economic Investment Development Co., Ltd., a Tianjin-based investment firm, will take the remaining 8% stake with an investment of USD 1.19 million.

Korean Air will send its own staff to serve as CEO and CFO of the venture.

The South Korean airline giant inked a contact to rent a plot of land, with a total area of 128,000 square meters, with the Tianjin airport in October 2006, an effort to construct the cargo transportation station in two phases from 2007.

The first phase will kick off construction in 2008 and is expected to be completed in the second half of 2009, with a cargo throughput of 380,000 tons a year. The timetable for the second phase has not been worked out, revealed a senior executive of the flag carrier, adding it will be decided mainly by the needs for cargo logistics and handling.

Actually, it is not the first time for it to cooperate with Sinotrans Air in China. Grandstar Cargo International Airlines Co., Ltd., a joint venture among Korean Air, Sinotrans Air, Hana Capital and Shinhan Capital, gained a business license from the Civil Aviation Administration of China (CAAC), the nation's air travel regulator, in November 2007.

The cargo airline, located in the airport with total registered capital of USD 65 million, is mainly engaged in the domestic and international cargo and mail air transportation.

China has grown into the world's second largest airfreight market after the US and expects to enjoy an annual growth of 10.85% on average over the following two decades, according to Boeing, one of the world's largest aircraft manufacturers.