China Eastern Airlines and China Southern Airlines are to receive cash injections from their state-owned parent companies through the issue of new shares to help them cope with growing losses.
The carriers, two of China's three largest, will each get cash injections of 3 billion yuan ($437 million) by selling new shares to their unlisted government-owned parent companies.
Shanghai-based China Eastern's parent CEA Holding will acquire 652.1 million new domestic "A" shares at 3.6 yuan each for a total price of 2.34 billion yuan. CEA Holding's overseas unit, CES Global, will at the same time buy new international "H" shares at 1 yuan each for a total of 652.1 million yuan.
The share purchases will lift to 68.2% from 59.7% the total direct and indirect shareholding CEA Holding will have in China Eastern.
Guangzhou-based China Southern will meanwhile issue 721.1 million new A shares to its parent company for 3.16 yuan per share, raising 2.27 billion yuan. The parent company's overseas arm will at the same time acquire 721.1 million new H shares for 1 yuan each.
China Southern Air Holding will own 59.2% after the share purchases, up from 50.3%.
The last of China's "big three" airlines, Air China, is in the strongest financial condition of the major carriers, although it too may receive a cash injection from the government soon, according to reports. Fourth-largest player Hainan Airlines has also indicated it may seek government aid.
China's airlines have been struggling this year as costs have risen and demand has fallen, in part because of natural disasters as well as strict visa restrictions that were imposed on foreign visitors ahead of the Olympic Games in Beijing in August.
Source: Flight International
