China Southern Airlines (CZ, Guangzhou) said on May 31 that it planned to fund up to CNY17.5 billion yuan (USD2.46 billion) through a private placement of shares, in part to aid in the purchase of fifty A320neo aircraft.
The state-owned airline will receive CNY5.25 billion (USD740 million) of the above amount for supplemental working capital, while CNY12.25 billion (USD1.72 billion) would be utilized to “introduce” the fifty new twinjets. The company “will adjust the funds that are raised” if the actual amount raised after expenses is less than the entire anticipated investment.
China Southern Airlines announced the same day that it will seek to raise an additional HKD2.9 billion Hong Kong dollars (USD408 million) for the same purpose in a second filing with the Hong Kong market, bringing the total amount of planned fundraising to USD2.87 billion. However, the money raised from this share sale to a select group of investors will be added to the business’s general operating fund rather than going toward buying a fleet.
According to China Southern, the issuance of A-shares in mainland China and the issuance of H-shares in Hong Kong “are not inter-conditional.”
The stock sales will relieve liquidity pressures brought on by the pandemic’s effects, help China Southern’s fleet grow to accommodate the rising demand for air travel in the Guangdong-Hong Kong-Macao Greater Bay Area, and “improve the company’s anti-risk ability and competitiveness,” according to the airline.
In its Shanghai declaration, the airline stated that the Pan-Pearl River Delta, which is made up of nine provinces, is “its vast development hinterland” and that the Greater Bay Area is at the vanguard of the opening up of coastal China. The goal is to make the airports in Guangzhou and Shenzhen more competitive as global centers. The airline said that growing the fleet will improve its capacity to benefit from this.
While Hong Kong-registered subsidiary Nan Lung Holding will subscribe to all of the newly issued shares on the Hong Kong market, China Southern Air Holding, the majority shareholder of China Southern, will be the lead investor in the private placement of shares on the Shanghai Stock Exchange. Although the documents did not specify how these shareholdings would alter following the stock sales, the overall holding company currently directly controls 51.9% of China Southern Airlines, and Nan Lung indirectly and directly owns 14.6% of the firm.
China Southern Airlines currently operates 39 A320-200Ns (with 27 more to be delivered), four A319-100neos (with five more to be delivered), twenty-eight A321-200Ns (with 64 more to be delivered), and an additional twenty-eight A321-200NXs as part of its narrowbody fleet.
