China Eastern Airlines plans US$2.4 bln private share sale to fund global push

[BEIJING] State carrier China Eastern Airlines Corp Ltd plans to raise as much as 15 billion yuan (US$2.42 billion) through a private share sale to fund the expansion of its fleet.

The announcement, which follows plans by rival Hainan Airlines Co Ltd to raise US$3.86 billion, comes as Chinese carriers seek to tap into a boom in local stock markets to fuel a new round of growth.

"Chinese carriers need new planes as they continue to expand their network around the world," said Liu Boyong, an industry analyst with Jefferies. "It's good timing to issue new shares as the stock market is in a bull run." In a stock exchange filing late on Thursday, China Eastern said it will issue up to 2.3 billion shares to no more than 10 outside investors, including security firms and foreign institutions.

Proceeds will be used to pay for 23 aircraft, costing 12.1 billion yuan, with the remainder going towards bank loans. The airline's scheduled purchases for 2016 include A321 jets from Airbus Group NV, and B737-800 and B777-300ER planes from Boeing Co.

Earlier this month, Hainan Air said it would use nearly half of the proceeds raised from its private placement to buy 37 aircraft. It will bring in 105 new aircraft by 2018, including 36 wide-body jets, it said.

Spring Airline Co Ltd, which raised US$400 million in a Shanghai listing in January, also wants to buy new planes. Junyao Airlines, which received regulatory approval this week for a 1.98 billion yuan Shanghai listing, will follow the same tactic.

In 2014, China Eastern's revenue from international routes increased 6.7 per cent from a year earlier, outstripping a 1.8 per cent climb in domestic sales, company data showed.

International revenue growth at Air China Ltd and China Southern Airlines Co Ltd also outpaced gains made on the domestic front last year.

REUTERS