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 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. When almost all airlines were losing money in the first half of last year, because of surging oil prices, Air China was still profitable," said Guo Dongmou, an aviation analyst at China Merchants Securities.
"Investors would have better expectations of Air China shares because of its profit-making capabilities."
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 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.
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 Capital International 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 metres 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.
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. (US$1=HK$7.76)
(China Daily February 11, 2006)
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