31-Mar-2006 10:04 AM
Air China to issue A-shares for aircraft purchases
Analysis
The Chinese flag carrier, which is listed in Hong Kong and London, said in a statement that the proceeds of the A-share issue will be used to finance its previously-announced purchase of 20 Airbus A330 aircraft, 15 Boeing B787s and 10 Boeing 737.
Air China spokesman Wang Kai told XFN-Asia that the mainland listing would give the company an opportunity to broaden its financing channels and provide more capital to fund its expansion plans.
The China Securities Regulatory Commission in April last year suspended mainland share issues in support of a plan to list currently non-traded state shares.
But the ban is likely to be lifted soon following growing political and market pressures and official satisfaction over the steady progress of state-owned share reform.
Large state-owned enterprises (SOEs) such as Air China are likely to be the first to list on the mainland when the ban is lifted.
"We are a big SOE and the government will encourage SOEs to list domestically," Kai said.
"The major SOEs like Air China will get priority for A-share listings," added Alan Lam, an aviation analyst with Guotai Junan Securities.
Lam told XFN-Asia that Air China has been preparing to list domestically since its initial public offering in Hong Kong in December 2004.
He said that the A-share issue would not affect Air China's performance on other stock markets, and added that it was the right thing for the company to do as funds raised through the listing will allow the airline to enlarge its fleet.
"I don't think it will have a negative impact on the company's performance elsewhere," Lam said, adding that Air China has a "healthy" balance sheet.
"An expansion of Air China's fleet is the way forward for the company," he said.
Air China's Kai said that the carrier's major shareholders approved the A-share issue despite the likelihood that it will dilute earnings in the near-term.
"There will be an effect on our shareholders because a portion of earnings will be diluted, but after discussions with major shareholders...they understand our intention for the A-share issuance - the company would like to expand and needs funds," Kai said.
He added that Air China is not facing a shortage of capital.
"There is no shortage of capital...this is an opportunity to balance our debt levels and take advantage of financing," Kai said.
Air China said in the statement that the nominal value of the shares will be one yuan with the issue price to be determined by market conditions at the time of the issue.
No timetable for the issue was provided, but shareholder approval lasts for one year, which implies the listing will happen by March 2007, or else Air China will have to seek approval again.
Air China will announce its 2005 results on April 12.
Air China spokesman Wang Kai told XFN-Asia that the mainland listing would give the company an opportunity to broaden its financing channels and provide more capital to fund its expansion plans.
The China Securities Regulatory Commission in April last year suspended mainland share issues in support of a plan to list currently non-traded state shares.
But the ban is likely to be lifted soon following growing political and market pressures and official satisfaction over the steady progress of state-owned share reform.
Large state-owned enterprises (SOEs) such as Air China are likely to be the first to list on the mainland when the ban is lifted.
"We are a big SOE and the government will encourage SOEs to list domestically," Kai said.
"The major SOEs like Air China will get priority for A-share listings," added Alan Lam, an aviation analyst with Guotai Junan Securities.
Lam told XFN-Asia that Air China has been preparing to list domestically since its initial public offering in Hong Kong in December 2004.
He said that the A-share issue would not affect Air China's performance on other stock markets, and added that it was the right thing for the company to do as funds raised through the listing will allow the airline to enlarge its fleet.
"I don't think it will have a negative impact on the company's performance elsewhere," Lam said, adding that Air China has a "healthy" balance sheet.
"An expansion of Air China's fleet is the way forward for the company," he said.
Air China's Kai said that the carrier's major shareholders approved the A-share issue despite the likelihood that it will dilute earnings in the near-term.
"There will be an effect on our shareholders because a portion of earnings will be diluted, but after discussions with major shareholders...they understand our intention for the A-share issuance - the company would like to expand and needs funds," Kai said.
He added that Air China is not facing a shortage of capital.
"There is no shortage of capital...this is an opportunity to balance our debt levels and take advantage of financing," Kai said.
Air China said in the statement that the nominal value of the shares will be one yuan with the issue price to be determined by market conditions at the time of the issue.
No timetable for the issue was provided, but shareholder approval lasts for one year, which implies the listing will happen by March 2007, or else Air China will have to seek approval again.
Air China will announce its 2005 results on April 12.