Air China expects US$1b from IPO
By Liu Jie (China Daily)
Updated: 2004-11-25 08:57

Air China, China's largest aviation carrier, is to raise up to US$1 billion from an initial public offering (IPO) in Hong Kong and London next month, in a bid to purchase more planes and to set up a new terminal and a headquarters building.

Though Air China declined to disclose the timetable of the listing, a source close to the State-owned carrier said that it has been decided that the IPO will commence on December 6 in Hong Kong and Air China is to list officially at the Hong Kong Exchange on December 16.

The source also said that Air China has set the price range for its IPO at HK$2.35 (30 US cents) to HK$3.1 (40 US cents) per share. The IPO is to involve 28.1 billion shares, or 31 per cent to 34 per cent of the company's total.

The IPO is expected to meet strong demand from investors, according to Yang Jing, an analyst with domestic research firm CCTIC.

Merrill Lynch and China International Capital Corporation have been appointed as advisers for Air China's listing.

Reports from the two advisers indicate that Air China's net profit is estimated to reach 2.29 billion yuan (US$275.9 million) this year, compared to 1.6 billion yuan (US$192 million) last year. The net profit for 2005 is estimated to be 3.1 billion yuan (US$373 million).

Market value of the giant carrier will range from US$2.5 billion to US$3.3 billion after the IPO. This is bigger than its Hong Kong-listed rivals China Eastern and China Southern with values of US$1 billion and US$1.7 billion respectively.

"China's aviation industry is rising, given the rapid economic development in the nation and the nation's opening up to the outside world, which implies an optimistic future for the company," Yang said.

Reports show that Air China is to spend 18.7 billion yuan (US$2.25 billion) on plane purchases, new terminal construction and the building of headquarters.

In the next two years, the carrier will buy 46 planes to meet increasing demand at home and abroad. A new terminal is expected to be erected in the northern area of the Capital International Airport for service upgrades.

"A modern building for Air China's headquarters will soon be built in the Tianzhu Airport Industrial Zone, neighbouring the Capital International Airport," said a manager of Air China, who declined to be named.

The manager acknowledged that Air China in October ruled out a New York listing and added London to Hong Kong as the second market for its planned equity offering.

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