Air China Limited and Cathay Pacific Airways Limited signed a Framework Agreement Thursday to establish a jointly owned cargo airline.

The two companies will use an existing cargo airline, Air China Cargo Co Ltd (ACC), a wholly owned subsidiary of Air China, as the platform for the joint venture.

Upon completion of the transaction, ACC will continue to be a subsidiary of Air China.

Air China will hold 51 percent equity in ACC while the Cathay Pacific Group will acquire a 25 percent equity interest directly in ACC and fund an offshore trust, in the form of a loan, to hold another 24 percent economic interest in ACC.

The total value of the Cathay Pacific Group's investment in the joint venture will be 1,669 million yuan (about 245 million U.S. dollars).

Cathay Pacific will also sell four freighters and two spare engines to ACC.

ACC plans to commence operations as a joint venture airline in the summer of 2010, with Beijing and Shanghai remaining as its principal operating bases.

The new board of directors at ACC will have seven directors, four (including the chairman) appointed by Air China and three ( including the vice-chairman) by the Cathay Pacific Group.

ACC began domestic and international operations in 2003 and currently operates seven Boeing 747 freighters. The airline operates all-cargo services to 14 destinations worldwide.

The Cathay Pacific Group operates 25 Boeing 747 freighters together with belly cargo space on 126 passenger aircraft. Scheduled freighter services are operated to 37 worldwide destinations.