Air China has announced its plan to conduct a private share placement in order to raise funds for the acquisition of new aircraft. This strategic move is aimed at bolstering the airline's fleet and expanding its operational capacity. The decision to pursue a private share placement reflects Air China's commitment to prudent financial management and its proactive approach to securing the necessary resources for its growth and development. By leveraging this funding opportunity, Air China seeks to enhance its competitiveness in the global aviation market and further solidify its position as a leading player in the industry.
Air China (CA, Beijing Capital) intends to raise up to CNY7.8 billion yuan (USD1.1 billion) via a private share placement to pay for new aircraft and boost its working capital, according to a December 22, 2023, stock market filing.
Aircraft Acquisition
While the filing did not disclose the details of the aircraft acquisitions, merely saying that "through the issuance of A Shares and H Shares to specific investors, the company intends to further optimize its fleet structure, rationally expand the fleet size, strengthen its security assurance capabilities, enhance the competitive advantage of its principal air transport business, and accelerate the realization of the company's strategic planning," it did reveal CNY4.2 billion (USD596 million) would be used to buy 17 aircraft. Chinese language news outlets report that this includes six C919s and eleven ARJ21-700s, with deliveries pencilled in across 2024 and 2025.
Share Issuance
Air China Limited intends to issue up to 854,700,854 new A-Class Shares to China National Aviation Holding (CNAHC), a Chinese state-owned enterprise that already holds 50.14% of Air China's issued stock and is its controlling shareholder. The A-Class Shares will be issued at CNY7.02 (USD1) each.
H-Class Shares
The airline also told the bourse that it intends to issue 392,927,308 new H-Class Shares to China National Aviation Corporation (CNACG) a CHAHC subsidiary that owns 9.61% of Air China's issued shares. The H-Class Shares will be issued at HKD5.09 Hong Kong dollars (USD0.65) each.
Financial Implications and H-Class Share Issuance
Air China's yuan-denominated A-Class Shares are traded on the Shanghai Stock Exchange (SSE), while the H-Class Shares trade on the HKEX. The A-Class Share issuance is flagged to raise approximately CNY6 billion (USD851 million), while the H-Class issuance will raise around CNY1.8 billion (USD255 million).
Utilization of Funds
In addition to buying new aircraft, the filing says the remainder of the funds will replenish working capital, improve capital structure, strengthen financial soundness, enhance the airline's comprehensive risk resistance capabilities, and boost market confidence.
Previous Fundraising
Earlier this year, Air China raised CNY15 billion (USD2.1 billion) after issuing 1,675,977,653 A-Class Shares to 22 investors, including CNAHC.
Approval Process
The new issuance remains subject to shareholder and regulatory approval. Air China says it will advise shareholders of a date for an extraordinary general meeting to vote on the proposal.
