(China Daily)
Updated: 2007-07-17 09:09

Shenzhen-listed Xi'an Aircraft International Corp, a subsidiary of Xi'an Aircraft Industry  million(Group) Co, will raise some 6.6 billion yuan(US$872 million) by selling new shares to its parent and other investors.

The move is considered a prelude to Xi'an Aircraft Industry (Group) Co's parent China Aviation Industry Corp I's (AVIC I) reorganization and consolidation of its commercial aircraft manufacturing business.

Xi'an Aircraft International Corp will sell 660 million yuan-denominated shares for at least 9.18 yuan a piece, it said in a statement to the Shenzhen Stock Exchange yesterday.

Its parent Xi'an Aircraft Industry (Group) Co will buy at least 55 percent of the shares with its airplane-making assets, according to the statement. It did not name the other investors.

The listed company, which mainly produces aircraft components, will gain control of 3.4 billion yuan in assets from its parent, including commercial airplane development, assembly and technology support.

After the asset injection, Xi'an Aircraft International's total assets are expected to quadruple from that at the end of 2006, with its revenue for 2007 increasing three times and net profits surging five times over 2006, according to the statement.

AVIC I, China's leading manufacturer of military jets and civil airplanes, said during the Paris air show last month that it would consolidate its commercial aircraft manufacturing business in order to become a competitive supplier in the global aircraft industry.

AVIC I is an important component supplier to Boeing and Airbus. Its international component subcontracting work is split among subsidiaries in Xi'an, Shenyang and Chengdu. These subsidiaries also share the manufacturing of the ARJ 21, China's first homegrown jet for civilian use.

Shares of Xi'an Aircraft International fell 10 percent to close at 27.28 yuan yesterday. The stock resumed trading yesterday after being suspended on May 17 pending the share-sale statement.

"The company has a positive mid-term prospect given the booming international aircraft manufacturing industry," said Li Lei, an aviation analyst with CITIC China Securities.

AVIC I delivered US$360 million worth of aircraft components to Boeing and Airbus last year, an 55 percent increase year-on-year.