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A special committee in charge of stock issuance under the China Securities Regulatory Commission (CSRC) has announced that it will deliberate the innitial public offering (IPO) application from Air China in A-share market.
China's flag carrier Air China went public simultaneously on the Hong Kong and London bourses in December 2004, raising about one billion U.S. dollars on the two stock markets.
Air China will issue no more than 2.7 billion Renminbi-denominated A shares on the Chinese mainland stock market, accounting for 22.25 percent of its total shares after the IPO, the Xinhua-run Shanghai Securities Journal reported.
Air China plans to raise fund of 8 billion yuan (US$1 billion) this time, and the share price is around 3 yuan, the newspaper said.
The A-share issuance price of Air China will not be lower than 90 percent of its H-share average close price during the A-share price inquiry period, the company said.
Last Friday, Air China's H-share price closed at HK$3.025 (about 3.12 yuan).
Air China will use the fund raised in the A-share IPO to buy 20 Airbus 330 planes, 15 Boeing 787 planes and 10 Boeing 737 planes as well as for its airport expansion project in Beijing, the capital of the country, according to its IPO document.
The continuous rise of jet fuel in recent years has increased the operational cost of Air China, and if the fuel price keeps increasing and the ticket price cannot go up correspondingly, the company's overall performances will be greatly affected, it said in the IPO document.
Meanwhile, the country's jet fuel surcharge policy also has a large impact upon Air China's business. Thanks to the resumption of jet fuel surcharge collection in October 2005, Air China gained 1.663 billion yuan as fuel surcharge income in 2005, 1.141 billion more than that in 2004.
Due to oil price fluctuations, the Chinese government has agreed to boost fuel surcharges from 20 yuan to 30 yuan for domestic air travels within 800 kilometers and from 40 to 60 yuan for travels over 800 kilometers this year.
The price adjustment is in effect from April 10 to October 10, 2006, and whether the government will extend the surcharge period will affect Air China's profit enormously.
Air China would be the second major State-owned firm to go public on the mainland after the Bank of China, which was given green light for listing on the mainland earlier this month after the country suspended initial public offering for about one year.
Other heavyweight Chinese firms, such as the Industrial and Commercial Bank of China, the country's biggest commercial bank, and China Mobile, are also reportedly to issue shares on the mainland.
The planned listing of those giant firms is part of the government's capital market development strategy to stabilize and boost the attractiveness of the domestic stock market.
(Xinhua News Agency July 24, 2006)
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