By Kevin Chen
China Airlines Ltd (CAL, 中華航空) plans to raise NT$5.8 billion (US$176 million) through a private placement to increase the company’s operating funds and repay debt, the nation’s largest carrier said in a statement yesterday.
The airline said its board of directors approved the plan on Wednesday, through which CAL would issue 602.9 million new shares at NT$9.62 each, the statement said.
The carrier expects to raise the funds between today and July 28 from designated investors, including state-run China Aviation Development Foundation (航發會), spokesman Bruce Chen (陳鵬宇) said yesterday by telephone. He did not elaborate.
The private placement is part of the company’s plan to sell up to NT$10 billion in bonds this year, in addition to new share issurance, to repay debt and boost its working capital, the company said in early April.
CAL, which reported its sixth quarterly loss in a row during the first three months of the year, said on April 30 that it expected to see rising quarterly revenue for the rest of the year thanks to more flights between Taiwan and China, as well as continued capacity adjustments and cost controls.
Based on cross-strait transportation agreements reached in April, starting from next month, the number of direct flights will be increased from 108 charter flights operated weekly by both sides to a total of 270 regular and chartered flights.
Earlier this month, the government reached agreements with the nation’s five carriers including CAL on the scheduled-flights allocation across the Taiwan Strait. Under the arrangement, CAL will operate 55 flights per week, as will EVA Airways Corp (長榮航空), while TransAsia Airways (復興航空) will operate 24 weekly flights.
Against this backdrop, CAL is likely to “re-allocate fleet capacity from Japan routes” next month to meet rising demand for cross-strait flights, Peter Kurz, head of Taiwan equity research at Citigroup Global Markets Inc, said in a client note on Tuesday.
But Chen dismissed speculation that the proceeds raised from the private placement would be used to expand its fleet of aircraft or other route adjustments in relation to the expansion of cross-strait flights.
“The purpose of this private placement is to strengthen our capital structure,” he said.
CAL’s revenue in the first quarter fell 26 percent year-on-year to NT$23.1 billion, and was down 18 percent from the previous quarter.
Its net loss totaled NT$2.96 billion, or NT$0.62 per share in the quarter.
That compared with a net loss of NT$2.97 billion a year earlier and a loss of NT$19.94 billion in the previous quarter.
For last year alone, the carrier recorded a net loss of NT$32.35 billion.
While falling oil prices and expanding direct flights were positive for CAL earnings, Kurz said in the note that CAL might continue posting net losses over the next two years, citing reasons such as falling demand for cargo transport amid the slowing global economy.
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