Paul Lewis/SINGAPORE
Hainan Airlines is to become China's first domestic carrier to list on the local share market, with a planned stock offer to foreign investors on the Shanghai exchange due to be made by the end of June.
The Haikou-based carrier expects to raise ´227 million ($33.4 million) from the sale of shares, representing around 15%of its stock, to foreign investors on the Shanghai bourse. Hainan Airlines president Chen Feng says that the initial offering will be followed later in the year by the sale of another 3.7% of the airline to local Chinese investors and a ten-year-term foreign-bond issue.
The local share issue is needed to keep foreign investment in the airline to below a Government-stipulated 35% ceiling. In November 1995, Hainan sold 25% of its stock to American Aviation Investment, partially controlled by financier George Soros, although that will now be cut to 21.2%. The rest is owned by domestic institutions and by employees, who hold nearly 13% of the stock.
The cash raised from the bond and share issues will be used to help back up new-equipment purchases. The airline says that it has approval from Beijing to acquire three Boeing 767-300s, the first of which would enter service in 1998 and the remaining two in 1999. It is also awaiting approval to order four more Boeing 737-400s and three 737-800s for delivery in 1998 and 1999.
Hainan already operates five 737-300s and four -400s, two Fairchild Metro 23s, one Learjet 55 and a 60. A further four Metro 23s are scheduled for delivery this year and three more in 1998. It hopes to raise additional funds by selling and leasing back from American Aviation two of its three-owned 737s. Its remaining narrowbody jets are supplied on six- to eight-year operating leases.
Observers have voiced concern that the four-year-old airline might be expanding too rapidly and that its future projections and plans are over-bullish. The carrier has gained a reputation as one of China's more ambitious independents and has irked the country's central authorities on more than one occasion.
Hainan is hoping for 20% growth in traffic by the end of 1997 so as to reach the minimum 1.5 million annual passenger mark, needed to qualify to become an international carrier under Chinese rules. The airline, which in 1996 claimed to have a made a net profit of $15.9 million, is initially targeting services to Hong Kong and Macau.
China Eastern was the first of mainland China's airlines to go public, with the listing of around 32%of its shares on on the Hong Kong and New York stock exchanges (Flight International, 12-18 February, 1997).
China Southern Airlines and China National Aviation (CNAC) are reported to be planning to follow suit ,with listings in Hong Kong expected later this year.
CNAC, a division of China's aviation ministry, became the largest single shareholder in Hong Kong carrier Dragonair, with a 36% stake, following the change in ownership agreed with Cathay Pacific in 1996.
Source: Flight International