Hainan Air plans share sale to fund expansion
(Xinhua)
Updated: 2005-04-25 10:19

Hainan Airlines Co., a Shanghai-listed carrier whose biggest shareholder is U.S. financier George Soros, plans to raise as much as US$900 million selling new shares to fund acquisitions and plane purchases.

China's fourth-largest airline would offer 2.8 billion nontradable shares to foreign and domestic investors, increasing its existing stock almost fivefold, Hainan Air said in a statement to the Shanghai Stock Exchange.

The carrier will use part of the funds to complete the acquisition of three smaller airlines as it expands to compete with rivals such as China Southern Airlines Corp. The cost of the company's expansion plans and the inability to trade the shares might deter investors, aviation analyst Jim Eckes said.

“I don't see any advantage in buying three small airlines,” said Eckes, the Hong Kong-based managing director of Indoswiss Aviation, which advises airlines. “You have to take over their debts and the cost of doing that is too high.”

Hainan Airlines has yuan-denominated A shares and U.S. dollar-denominated B shares traded on the Shanghai Stock Exchange. The B shares fell 2.8 percent to 35.1 U.S. cents Friday and are down 37 percent in the past year, more than the 29 percent decline in the Shanghai Composite Index. Its A shares fell 0.3 percent to 3.06 yuan Friday and are down 40 percent.

China's airlines are expanding as rising incomes and trade growth spur demand for leisure and business travel. The nation's air passenger traffic is likely to grow 7.3 percent annually until 2023, faster than the global average of 5.2 percent in the same period, aircraft maker Boeing Co. forecasts.

Hainan Air operates more than 500 routes on the Chinese mainland and flies to Asian destinations such as Seoul, Hong Kong and Osaka. The company said in August that it might start flights to the United States as early as this year as part of plans to expand outside Asia.

The company also plans to buy out minority interests in Xinhua Airlines Co., Changan Airlines Co. and Shanxi Airlines Co.

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