Air China Ltd, the
nation's flagship carrier, is awaiting government approval to issue
A shares to finance the purchase of 45 aircraft and expand its
facilities at Beijing
Capital International Airport.
The Hong Kong-listed airline plans to sell no more than 2.7
billion yuan-denominated shares at the Shanghai
Stock Exchange, or about 28.62 percent of its existing share
capital, to qualified institutional investors, the company said in
a notice to the Hong
Kong Stock Exchange on Thursday.
The issue price "will not be lower than 90 percent of the
average closing price" of Air China's H shares, the company said in
the notice.
"The A share issue will provide a new financing platform for Air
China. After listing in Hong Kong for more than one year, we also
want to get recognition from domestic investors," said Rao Xinyu,
secretary of the board of Air China.
Rao declined to make a forecast on the timetable of the listing.
She also refused to say how much capital Air China plans to raise
through the listing.
"That's up to government approval procedures and market
conditions," Rao said.
Analysts said Air China, if approved to be listed domestically,
might see stronger stock performances than the other two large
airline groups, China Eastern Airlines and China Southern Airlines,
because of its better capabilities to make a profit.
"As the country's flagship carrier, Air China has a stronger and
more extensive flight network than its peers," said Guo Dongmou, an
aviation analyst at China Merchants Securities. "When almost all
airlines were losing money in the first half of last year because
of surging oil prices, Air China was still profitable."
"Investors would have better expectations of Air China shares
because of its profit-making capabilities," Guo said.
Air China will soon issue its 2005 annual report. The interim
report showed that the airline earned a profit of 642 million yuan
(US$79.8 million) in the first half of last year, dropping 23
percent year on year.
China Eastern lost 410 million yuan (US$50.7 million) and China
Southern suffered a loss of 843 million yuan (US$104.7 million)
during the same period.
"But as the whole aviation industry is plagued by record-high
fuel prices, I don't think the issue price of Air China shares
would be very high," Guo added cautiously.
Global airlines are expected to see total losses of US$7.4
billion due to high oil prices, the International Air Transport
Association said earlier.
The China Securities Regulatory Commission (CSRC) is
widely expected to lift its ban on share sales this year. The
securities watchdog last year suspended new share listing while it
launched plans to convert more than US$200 billion of state-held
stocks into tradable shares.
Air China said the domestic listing will help finance the
purchase of 20 Airbus A330-200 aircraft, 15 Boeing 787s and 10
Boeing 737-800s. The aggregate catalogue price of these aircraft is
US$5.68 billion. The deals were clinched last year and last month
separately.
The aircraft from the purchases will principally serve routes to
international destinations in Europe, Australia, North America and
certain key domestic destinations such as Lhasa, Air China said in
the notice.
Projects relating to the expansion of Air China's operating
support facilities at Beijing airport are expected to be worth
around 600 million yuan (US$74.5 million), the notice said. They
include the acquisition of land with an area of approximately 1
million square meters and the expansion of ground service
facilities.
Air China was listed in Hong Kong at the end of 2004.
Its shares fell 0.94 percent to HK$2.625 on Friday
(US$1=HK$7.76).
Air China last year transported 27.7 million people, rising 13
percent year on year, and 732,800 tons of cargo, up 10.2 percent
year on year.
(China Daily February 11, 2006)