Western investors are showing a willingness to gamble in the vast aviation markets of China and Russia, with the prospect of a partially foreign owned Chinese regional and a foreign controlled Siberian airline.
US financier George Soros wants to take advantage of Beijing's clearance earlier this year for foreign investments in its carriers. Meanwhile, a Dublin-listed investment fund plans to boost its stake in Siberian carrier Baikal Airlines to a majority holding, now allowed under Russian law.
Soros has made a $25 million bid for a quarter stake in the Chinese domestic Hainan Airlines. The carrier, which operates six B737s to 21 Chinese cities, has accepted the bid but completion of the deal depends on final approval from the ministry of finance and the Chinese Securities Regulatory Commission.
The Civil Aviation Administration of China says approval was given to Hainan to negotiate the sale but the deal remains 'an experiment', with approval not guaranteed. Beijing's ruling earlier this year says control must remain in Chinese hands.
Soros has set up American Aviation Investment, owned by Phoenix Information Services and the Chatterjee Group, as a vehicle for the investment. Haikou-based Hainan has been talking to foreign investors for two years, but with little success until now.
Baikal Airlines, based in Irkutsk, has sold 34.5 per cent of its equity to the Central Asian Investment Company and another unnamed foreign fund. The stake is set to increase to 56.3 per cent by the end of 1995, according to Charles Fowler, fund manager at John Govett Investment, the UK-based manager of CAIC.
T Ballantyne/S Guild
Source: Airline Business
