Thu, Dec 16, 2004 - Page 11 News List

Air China makes waves on HK stock exchange

DUAL LISTING Shares in the Beijing-based carrier, which were also to be listed in London later yesterday, rose 8 percent in their first day of Hong Kong trading

AP AND BLOOMBERG , Hong Kong

Shares of China's biggest airline, Air China Ltd (中國國際航空), rose 8 percent in their debut on the Hong Kong stock exchange yesterday, boosted by robust growth in China's air traffic.

Air China, the third Chinese carrier to list in Hong Kong, opened at HK$3.15 -- 6 percent higher than its initial public offering (IPO) price of HK$2.98.

Analysts had expected the airline's shares to open 5 percent to 10 percent above its IPO price.

The airline closed at HK$3.225, about 8 percent above its IPO price. Analysts expect the stock to rise further in coming weeks as a result of falling oil prices and strong demand for air travel in China.

Air China's costs are reduced by 140 million yuan (US$16.9 million) for every US$1 decrease in the price of oil, said Fan Cheng (樊澄), the airline's chief financial officer.

The company will spend about 8 billion yuan on fuel this year, Fan said. It spent 5.4 billion yuan last year.

The Beijing-based carrier was to be listed in London later yesterday, making it one of the few Chinese companies to have a dual listing in the UK and Hong Kong.

Air China Chairman Li Jiaxiang (李家祥) said the airline chose London over New York because it has a greater exposure to European destinations.

"The dual listing of Air China in Hong Kong and London is a great milestone for the company," Li said.

Air China raised HK$8.36 billion (US$1.07 billion) by selling 2.806 billion shares, or a 30 percent stake.

The airline, which has a fleet of 136 aircraft, said the funds raised from the offering will be used to buy 10 Airbus and four Boeing jets and to repay debts.

Air China said it expects a strong rebound in its full-year earnings, with net profit rising to 2.29 billion yuan (US$276.57 million) -- from 159.60 million yuan last year when the airline was hit hard by the SARS outbreak.

Last month, Hong Kong's flag carrier, Cathy Pacific Airways Ltd, signed a memorandum of understanding with Air China to buy 9.9 percent of the Chinese airline's IPO shares.

The deal, which includes coordinated schedules and joint marketing efforts, will give Cathay a bigger presence in the booming mainland market from which the Hong Kong carrier has so far been largely excluded.

Two other Chinese carriers have already listed in Hong Kong -- China Southern Airlines Co (南方航空) and China Eastern Airlines Corp (東方航空).

Air China, China Southern and China Eastern face increasing competition from international carriers such as Northwest Airlines Corp as Asia's second-largest economy opens up its aviation market.

The US and China signed an agreement in July to more than double the number of US carriers serving China, and to increase the number of flights between the two countries almost fivefold.

"That shouldn't be a big problem, given that there's so much traffic between China and the rest of the world," Peter Chau, deputy managing director of TAL CEF Global Asset Management Ltd, said yesterday.

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