Investment

Air China to Raise Up to USD2.2 Billion in Private Placement to Pay for 22 New Aircraft

(Yicai Global) Aug. 3 — Air China, China’s flagship airline, aims to raise up to CNY15 billion (USD2.2 billion) through a private placement of new shares to pay for part of its new plane order that breaks the record. with European aircraft maker Airbus.

Air China will issue new shares of no more than 30 percent of its total share capital to as many as 35 investors, the Beijing-based company said yesterday. The majority stakeholder of China National Aviation Holding will subscribe to at least CNY5.5 billion (USD814.8 million) of shares. The price of the offer was not mentioned.

CNY10.8 billion of the proceeds will be used to pay for 22 new planes, including nine A350 and four A320 NEO aircraft manufactured by Leiden, the Netherlands-based Airbus and nine ARJ21 jets from Commercial Aircraft Corporation of China. They should be delivered this year and next. The rest of the funds will go towards increasing working capital, it said.

The order is part of a larger purchase contract for 292 Airbus-made A320 Neo jets placed by the country’s three largest carriers, Air China, China Eastern Airlines and China Southern Airlines, last month. Valued at USD37.3 billion, this is the largest aircraft order for the three. Air China will buy 96 of them for USD12.2 billion. The planes will be delivered between next year and 2027.

Air China plans to have a larger fleet in three to five years, as older planes go out of service, and also to meet the expected growing demand for air travel once the Covid-19 pandemic ends, it said. . The carrier has not bought many new planes in recent years and its 746 aircraft are now on average more than eight years old.

The Covid-19 pandemic has hit the civil aviation industry as air travel comes to a standstill. Air China is bracing for losses of up to CNY21 billion (USD3.1 billion) in the first half, a widening of 26.5 percent from last year’s total losses and 45 percent from 2020.

China’s Civil Aviation Administration will inject CNY11 billion (USD1.6 billion) into the top three carriers as well as airport operator Capital Airports Holding and secure CNY150 billion in emergency loans to keep the industry operating as normal , it said last month.

The stock price of Air China [SHA:601111] closed up 0.41 percent at CNY9.63 (USD1.44) today, giving it a market capitalization of about CNY140 billion (USD20.7 billion).

Editor: Kim Taylor