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Foundation to sell a third of its stake in China Airlines

The top shareholder in China Airlines Co (華航) said yesterday it plans to sell between a 20 percent and 30 percent stake in the airline by the end of June.

The China Aviation Development Foundation (航發會), currently has a stake of 71 percent.

The sale would be part of government efforts to privatize the airline before the end of the year, foundation chief secretary Lin Chun-cheng said.

Stalled efforts to reduce the foundation's management control were revived after a China Airlines jet crashed en route to Hong Kong from Taipei in May last year, killing all 225 people aboard.

Following the crash, the airlines' 10th fatal accident since 1970, Premier Yu Shyi-kun pledged to privatize the carrier within two years.

Critics have blamed the airline's confusing ownership structure and lack of accountability for its poor safety record.

According to Lin Chun-cheng, the foundation's board -- chaired by Minister of Transportation and Communications Lin Ling-san (林陵三) -- will select a financial adviser for the sale before the end of next month.

Lin Chun-cheng said six or seven interested companies have submitted bids for the consultant role, including Salomon Smith Barney, which had been tapped in a failed attempt a few years ago to sell the foundation's stake.

The adviser will be authorized to draw up a detailed privatization proposal and will work with the foundation's board to carry out the share sale.

The goal is to initially sell a 20 percent to 30 percent stake to strategic investors before the end of June, he said.

"We will put the investors under a six-month observation period after they sit on the board," Lin Chun-cheng said. "The foundation may sell more shares to the investors if they demonstrate strong management skills."

Both local and foreign investors are welcome, he said.

He said the foundation's plan is to lower its stake in the airlines to below 35 percent and pull out of the airline's management before the end of the year.

Analysts say China Airlines' lucrative Taipei-Hong Kong route, which underpins the carrier's profitability and the foundation's coffers, should help to attract investors.
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