Air China seeks US$2.2 billion from private share offering to buy more Airbus jets, replenish capital
- Chinese flagship carrier says 4.36 billion additional shares, or 30 per cent of its existing share capital, will be issued to 35 designated investors
- A private offering could ensure that Air China secures enough capital to bolster its business amid market volatility, analyst says
The flagship carrier is aiming to sell 4.36 billion new shares, or 30 per cent of its existing capital, to 35 designated investors, according to a stock exchange filing on Tuesday. They include controlling shareholder China National Aviation Holding, which is expected to buy 5.5 billion yuan worth of the shares.
The carrier said 10.8 billion yuan of the proceeds would be used to buy 22 planes, including nine ARJ21 regional jets, four A320neo and nine A350 passenger planes from Airbus. The remaining 4.2 billion yuan would be used to replenish its working capital.
The targeted proceeds of 15 billion yuan translate into a per share price of 3.44 yuan for the share offering. Air China’s A shares closed at 9.67 yuan on Tuesday, unchanged from a day earlier.
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“A weak market could make it difficult for a heavyweight company to raise additional funds,” said Ivan Li, a fund manager at Shanghai-based Loyal Wealth Management. “Raising funds from designated investors via a private offering could ensure that Air China would secure enough capital to bolster its business.”
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Beijing-based Air China is following in the footsteps of China Eastern Airlines, which in May announced a plan to net 15 billion yuan through a share sale to buy more passenger planes and boost capital. The Shanghai-based carrier had earmarked 10.5 billion yuan of the proceeds to purchase 38 airplanes.
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The mainland carriers’ decision to add more Airbus planes over Boeing aircraft tipped one of the most lucrative big-ticket deals in global commerce in Europe’s favour, taking it off the negotiations table as the US and China remain mired in trade disputes left over from the Trump era.
The Chinese carriers have been hard hit by the Covid-19 pandemic since 2020. Air China said its loss last year widened 15.2 per cent to 166 billion yuan from a year earlier.
