Airline IPO prepares for HK take-off
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Grand China Airlines, the flagship of the country's fourth-largest airline company HNA Group, plans to raise 10 billion yuan ($1.51 billion) in private placement and then float shares on the Hong Kong Stock Exchange this year.
The move is part of the parent company's plan to increase its presence in the regional air market, industry insiders said.
HNA Group originally tried to list Grand China in 2006, but this time it aims to raise 10 billion yuan in a private placement first, according to the Economy & Nation Weekly.
The funds will be used to develop Grand China into a national carrier by combining its operations with those of other regional carriers, including Chongqing-based West Air and Tianjin-based Tianjin Air, formerly known as Grand China Express, a HNA-controlled business. The two companies are valued about 5 billion yuan ($759 million) each.
Industry analysts said the timing is ripe for the carrier to go public.
"Last year, the airline industry witnessed historic growth in terms of market growth and profits," said Li Lei, an analyst at Citic China Securities. He said the growth was at least 200 percent, with profits of between 20 and 30 billion yuan.
The speculation about the airline's public listing in Hong Kong came as a result of the group's restructuring during the past year to optimize the company's portfolio.
Analysts believe that Grand China's listing will provide the company with more resources to expand its regional flight market.
"HNA Group has a long tradition of growing up with the support of the capital market. Now, facing a bottleneck in its development, the Hong Kong listing will provide the company with more capital to enhance its domestic regional flight market," said Li Xiaojin, a professor with the Civil Aviation University of China.
HNA Group owns 24.07 percent of Grand China and 7.21 percent of the Shanghai-listed Hainan Airlines. With 19.7 billion yuan in revenue and 220 million in net profit in 2009, Grand China Airline owns 41.6 percent of Hainan Airlines and gains its 90 percent revenue from it, said the weekly.
The controlling shareholder of Grand China Airlines is the State-owned Assets Supervision and Administration Commission of the Hainan provincial government.
