CHina Southern Airline receives 3 Billion Yuan
China Southern Airline Receives 3 Billion Yuan Capital Injection
China Southern Airlines Co.'s state-owned parent will receive a capital injection of 3 billion yuan ($439 million) from the government, which may allow the carrier to repay its debts and buy new planes.
China Southern announced that it would be considering a non-public share sale, in a Hong Kong stock exchange statement made yesterday.
In a separate Shanghai stock exchange statement, China Eastern Airlines Corp. also said that it was is in talks with its parent about ways of reducing its debt levels.
China Southern and China Eastern have racked up debts of about 70 billion yuan apiece after combining with unprofitable carriers and buying new planes in anticipation of surging demand.
Instead, the airlines have been hit by higher fuel prices, flight disruptions and a cooling economy.
"The injection shows that the government won't sit back and watch its airlines go bankrupt," said Li Lei, an analyst at China Securities Co. in Beijing. "The funding will help but it's far from enough to revive the money-losing airlines."
China Southern's share sale plan will be reviewed by the authorities within 10 working days, the Guangzhou-based airline said. Parent China Southern Air Holding Co. will get the funds from the Ministry of Finance, it added.
The carrier's Hong Kong shares, halted from trading yesterday, and will remain suspended, China Southern said. China Eastern's Shanghai shares will be suspended from Thursday.
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