JOHN Menzies has made a multi-million pound expansion move in China amid hopes of recovery in the aviation services sector.

The Edinburgh-based group has bought a stake in a venture in China in a £3.4m deal that it expects to help it build a big position in a lucrative market.

John Menzies will manage and operate a new cargo terminal at Guangzhou Baiyun International Airport in China on behalf of the venture. It described the airport as one of the world’s busiest.

The company expects the deal to provide a boost to revenues in the short term, while giving it a platform for growth in an attractive area.

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Philipp Joeinig, chairman and chief executive of John Menzies, said the company’s expansion in the Chinese cargo market would help to deliver on its plans to expand in global markets.

“This investment demonstrates our commitment to delivering on our strategy and I am very excited about the opportunity it brings,” said Mr Joeinig.

John Menzies has been hit hard by the fallout from the coronavirus crisis. The imposition of lockdowns around the world led airlines to slash services, impacting demand for services that John Menzies provides, such as passenger handling.

In response the company launched a cost-cutting programme under which it reduced employee numbers by around 30 per cent. It had 32,000 employees before launching the programme, including 6,500 in the UK.

However, directors insisted the long term fundamentals of the aviation business remained sound, with passenger and cargo volumes likely to return to an upward trajectory after the crisis.

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Last month the company managed to raise £22m from investors though a fund-raising that was oversubscribed. This signalled confidence in the company’s prospects.

The outlook for the sector has brightened in recent months amid the rollout of coronavirus vaccination programmes around the world.

In an update issued on the day the company launched the fund-raise John Menzies noted encouraging signs of airlines rebuilding flight schedules.

However, the update indicated that conditions were much brighter in markets such as Australasia and the USA than in Europe.

“The ongoing impact of the pandemic and consequent travel restrictions in Europe have meant that the recovery in ground and fuelling services has been below the Group’s expectations for the year to date,” said the group then.

The company has not changed its guidance in response to the spread of the Delta variant of the coronavirus in the UK. This is likely to mean that curbs on international travel remain in place for longer than hoped.

Only 11 countries or territories are on the Scottish Government’s green list of places that people can visit relatively freely.

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Regarding the Guangzhou operation, John Menzies noted yesterday that it expected the new operation to focus initially on “the handling of product related to the fast growing Chinese e-commerce market with the potential to expand into more general air cargo handling for airlines in the future”.

.John Menzies has had cargo operations in the semi-autonomous region of Macau since 2000. Macau is not considered to be part of mainland China.

John Menzies said the £3.4m investment in China will allow it to acquire a acquire a minority equity stake, by way of a joint venture, in Guangzhou JFreight Aviation Logistics Supply Chain Co. Ltd. It noted that JFreight is experienced in artificial intelligence and robotics.

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John Menzies decided to focus on aviation services after running businesses connected with the news trade for more than 100 years. The group sold its newspaper distribution business in 2018 to the Endless private equity firm, for £74.5m after facing calls from investors for a break-up.

The group recently won a contract to provide services at Baghdad International Airport.