Grand China Air to sell shares for fleet growth

HONG KONG: WEBSUMMARY: Grand China Air to sell shares for fleet growth

It will join other carriers in expansion race

Grand China Airlines, part-owned by the U.S. financier George Soros, said it may raise more than 5 billion yuan, or $645.8 million, in a Hong Kong stock sale this year, as it seeks funds to expand its fleet.

"We are actively preparing for the sale, aiming to make it happen this year," the company's chairman, Chen Feng, said Wednesday at the annual meeting of the Chinese legislature in Beijing. "We will need the funds to buy a lot of new planes" from both Airbus and Boeing, he said without elaborating.

Grand China Air, the parent of Hainan Airlines, China's fourth largest carrier, follows Air China and other Chinese airlines in selling shares to fund expansion. The country's carriers could spend $289 billion over the next two decades to more than triple their passenger fleet to 2,700 planes in 2025, according to Airbus.

"Investors are still attracted to Chinese airlines due to the growth of the aviation market in the country," said Alan Lam, an analyst at Guotai Junan Securities (Hong Kong). "The company may also attract investor confidence as it already has a strategic investor."

Hainan Airlines, based in southern China's Hainan Island, had a backlog of 37 Boeing and 20 Airbus aircraft at the end of January, according to data on the planemakers' Web sites. The airline presently flies 125 planes on about 500 mainly domestic routes between 90 cities, it said on its Web site.

Shares of Hainan Airlines, unchanged Wednesday at 5.03 yuan in Shanghai, have gained 27 percent this year, compared with a 25 percent rise in the benchmark Shanghai and Shenzhen 300 Index.

Chinese airline passenger numbers should rise by an average of 14.5 percent a year to 270 million in 2010, state-run Xinhua News Agency said in October, citing the country's aviation regulator.

Hainan Airlines raised 5.6 billion yuan selling shares to Grand China Air and five other investors last year, it said on June 30. Grand China Air is temporarily called Xinhua Shareholding, China Daily said on March 6.

Hainan Airlines likely made a profit in 2006 compared with a loss of 215.8 million yuan a year earlier as it carried more passengers and cargo, it said in a Jan. 23 statement to the Shanghai stock exchange. The carrier plans to merge with closely held Xinhua Airlines, Changan Airlines and Shanxi Airlines to form Grand China Air.

Soros is building an 18.64 percent stake in Grand China Air, Hainan Airlines said on June 30. The financier already holds 9.2 percent of Grand China Air, and will more than double this stake by trading his Hainan Airlines holdings for shares in its parent. He agreed to invest $25 million in Grand China last year, Hainan Airlines said on Oct. 17, 2005.

Soros holds 108 million Class B shares in Hainan Airlines through closely held American Aviation, following an initial investment of $25 million in 1995.