The majority owner of Taiwan's China Airlines (CAL) has temporarily suspended plans to sell a 35.5% stake in the airline after an advisory contract with investment bank Salomon Smith Barney expired before a buyer was found.
The government-linked China Aviation Development Foundation (CADF), which holds a 71% stake in CAL, has been trying to find a buyer for half its holding since it hired Salomon in June last year. The initial six-month contract was extended in December, but expired late in March.
A senior CADF official, who asks not to be named, says that while no airline buyer was found by the end of the extended contract period, political change in Taiwan has left the foundation's plans uncertain.
"It is not going to happen in the very near future," the official says, although he adds that there is a possibility a new contract will be signed with Salomon. "It is very difficult to say what will happen because of the new changes," he adds, referring to the pending change of presidency in Taiwan.
National elections in March saw the ruling Kuomintang (KMT) party's candidate defeated by Chen Shui-bian of the Democratic Progressive Party. Chen formally takes over as Taiwan's president from Lee Teng-hui in late May.
The CADF said soon after the elections that it expected there would be no impact on its CAL sale plans as the Taiwanese Government and not the KMT direct has a stake in the foundation. However, the KMT has held power for 55 years and has strong ties to many of Taiwan's businesses that will take time to sever. There has also been speculation that some in the party are strongly opposed to CAL being sold.
Chen advocates independence from China. While his stance on government ownership in companies such as CAL is unclear, analysts believe he is likely to support privatisation.
The CADF official says "the board members haven't discussed the issue yet", although it is unlikely that sale plans will be back on track. A new board is to be appointed in July. The Taiwanese Government holds five of the board's nine seats. All are held by KMT officials.
Plans to sell the 35.5% CAL stake were unveiled in 1998 after the crash of one of the airline's Airbus A300-600R at Taipei that led to calls for major change at the carrier.
After losses in 1998, the carrier made a strong recovery in 1999, ending the year with a net profit of NT$2.74 billion ($90 million).
Source: Airline Business
