Proceeds from Air China's pending initial public offering (IPO) and future operating cash flow may not be sufficient to cover planned capital expenditure.

The Chinese mainland carrier acknowledges that significant supplemental financing may be required after the IPO to ensure that expansion plans remain on track.

According to a draft listing prospectus reviewed by the South China Morning Post, the company has to project nearly 19 billion yuan in upgrade and expansion expenditure from this year to 2006.

The analyst says its debt-to-equity ratio is lower compared with those of its rivals, which typically reach six or seven.

The company hopes to raise at least 800 million US dollars next month through the sale of 3 billion shares, or 30 per cent of its enlarged share capital, in Hong Kong and London.

China International Capital Corp and Merrill Lynch are arranging the dual listing.

(CRI.com November 1, 2004)