Airlines
China Southern to raise over $2.8 billion to fund new aircraft purchase
In a filing with the Shanghai Stock Exchange on May 31, China Southern Airlines stated that it intended to raise up to CNY17.5 billion yuan (USD2.46 billion) through a private placement of shares, with some of the funds going towards 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.
The Guangzhou-based airline announced on the same day that it is prepared to offer CNY17.5 billion (USD2.5 billion) in new Shanghai shares and HKD2.9 billion (USD370 million) in new Hong Kong shares to chosen investors.
China Southern Airlines orders 20 Airbus A350 XWBs(Opens in a new browser tab)
A private placement, in which additional stock is offered to certain investors to generate money, reduces the number of outstanding shares of a listed firm, frequently resulting in a temporary drop in the stock price.
According to China Southern, over CNY12.3 billion from the Shanghai share sale will be utilized to purchase 50 aircraft from the Airbus A320 Neo family, with the remaining funds being used to increase working capital. The funding for the general operations of the company will now include the profits from the Hong Kong private placement.
According to China Southern, Airbus A320 Neo aircraft are among the most popular short- and medium-haul airplanes in the world. According to the catalog pricing on the European aircraft manufacturer’s website, which is dated January 2020, the 50 aircraft will cost approximately USD 6.4 billion.
