Investor sentiment towards airlines in Asia is showing signs of weakness with disappointing share sales by two of the region's major carriers, Air China and Japan Airlines.
In July, Japan Airlines - the largest carrier in the Asia-Pacific region - saw a poor response to a sale of new shares, which raised far less than it had hoped.
Japan Airlines said early in the month that it was seeking to raise more than ¥200 billion ($1.7 billion) through the issue of 700 million shares to help it improve its financial position and modernise its fleet. It said there would also be an overallotment option of 50 million shares, potentially lifting the total raised to as much as ¥222.7 billion.
But a weak response from investors forced Japan Airlines to price the issue at the low end of expectations, raising just ¥147.7 billion. The airline has been in financial difficulty as it has been hurt by increased fuel costs and a series of much-publicised safety issues last year that prompted many Japanese travellers to switch their business to rival All Nippon Airways.
Air China, meanwhile, was hoping for better from a domestic initial public offering in August, but it too was disappointed. One of China's few profitable airlines, Air China was planning to issue as many as 2.7 billion new shares on the Shanghai stock exchange priced at up to 2.95 yuan each, potentially raising 7.97 billion yuan ($1 billion).
However, demand for this offer was also far weaker than expected and it was forced to reduce the size of the issue to 1.639 billion new shares priced at 2.8 yuan each, raising just 4.58 billion yuan. Air China is already listed in Hong Kong and London. ■
Source: Airline Business
