The holding company behind China Southern Airlines, mainland China’s largest carrier, will receive a cash injection of 30 billion yuan (US$4.36 billion) from three fund-management firms, the company said in a filing to the Hong Kong stock exchange. The money is intended to boost its war chest for overseas expansion.
In its filing, the airline said its parent, China Southern Air Holding (CSAH), had entered into a capital increase agreement with three investors “to implement the relevant requirements of the Central Committee of the Communist Party of China and the State Council on deepening the [equity diversification] reform of state-owned enterprises.”
Under the agreement, Shenzhen Penghang Equity Investment Fund Partnership, state-backed Guangdong Hengjian Investment Holding and Guangzhou City Construction Investment Group will each contribute 10 billion yuan to CSAH’s registered capital.
The move does not change CSAH’s status as one of the 96 state-owned enterprises supervised by the central government’s State-owned Assets Supervision and Administration Commission, and its role as the controlling shareholder of China Southern, the airline added. Details of the shareholding structure following the transaction were not disclosed.
The proceeds will be used primarily to boost China Southern’s core air transport business, and “in line with the Belt and Road Initiative and the Guangdong-Hong Kong-Macau Greater Bay Area strategy”.
China Southern is based in Guangzhou, one of the nine mainland Chinese cities near the Pearl River Delta in Guangzhou province that together with the special administration regions of Hong Kong and Macau are covered by Beijing’s the Greater Bay Area initiative.
The initiative aims to develop an innovation-driven business powerhouse in southern China that can rival the Silicon Valley in the US and Japan’s Tokyo Bay Area.
The Belt and Road Initiative is aimed at fostering closer economic ties with countries in Central Asia, Europe, the Middle East, Africa and Southeast Asia, first by improving transport to and infrastructure in these regions.
Wu Guoxiang, China Southern’s senior vice-president for international and corporate relations, said last month it was set to become the world’s biggest carrier in the next three to five years, and did not plan to seek an alliance with any of the industry’s major groups before 2021.
China Southern, a listed company, last year posted a 51.4 per cent decline in net profit to 2.9 billion yuan, on the back of higher fuel costs. In the first three months this year, its profit rose 4.1 per cent year on year to 2.65 billion yuan.
It carried 8 per cent more passengers in the first half the year than the same period last year, while cargo carried fell 1.25 per cent.
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