Soros injects another US$25m into Hainan Airlines
By Zeng Qingkai (China Daily)
Updated: 2005-10-17 05:45

HAIKOU: International financier George Soros has successfully expanded his investment in Hainan Airlines, pouring another US$25 million into China's fourth-largest carrier.

"We are very confident about the future development of Hainan Airlines," said Soros on Saturday when he paid a visit to the carrier in South China's Hainan Province.

Soros, the first overseas investor to take a major stake in a Chinese airline, paid about US$25 million in 1995 for 14.8 per cent of Hainan Airlines. The Soros-controlled American Aviation LCD is Hainan Airlines' largest shareholder.

Chen Feng, chairman of the Shanghai-listed carrier, revealed that the investment will be used to reorganize Hainan Airlines and build a new brand, Grand China Air, by merging smaller carriers.

Chen said Hainan Airlines Group, parent of the carrier, has obtained approval from the General Administration of Civil Aviation of China (CAAC), the country's civil aviation regulator, to form a new carrier this year by merging Hainan Airlines and its subsidiaries Xinhua Airlines Co, Changan Airlines Co and Shanxi Airlines Co.

"At the end of this year, we will finish the second phase of private placement capital, amounting to 5 billion yuan (US$617 million), and by that time the new carrier, Grand China Air, is expected to be put into operation," Chen said.

Chen also said Soros' injection of fresh funds marked the completion of the first phase of private placement for the company. The sum is 3 billion yuan (US$370 million), mostly gathered from domestic strategic investors.

"For the third phase as we planned, the new carrier will be listed as H shares next year," said Chen.

"Soros' investment clearly shows that Hainan Airlines' performance is outstanding, on a par with international airlines, and it also reflects that Soros would not exercise an option to trade his 14.8 per cent stake on the Shanghai Stock Exchange," said Chen.

Last year at the World Economic Forum, in Davos, Switzerland, Soros stressed he would not trade the option.

"It's a fine company, and I don't have enough exposure in China."

Hainan Airlines has A and B shares trading on the stock market. The A shares surged 9.09 per cent to 2.64 yuan (33 US cents) on Friday, while the B shares jumped 7 per cent.

Chinese airlines are expanding as rising incomes and trade growth spur demand for leisure and business travel. The country's air passenger traffic is likely to grow 7.3 per cent annually until 2023, faster than the global average of 5.2 per cent over the same period, aircraft maker Boeing forecasts.

Hainan Airlines operates more than 500 routes in Chinese mainland and flies to Asian destinations such as Seoul, Osaka, Macao and Kuala Lumpur. The company said in August it may start flights to the United States as early as this year as part of plans to fly beyond Asia.

(China Daily 10/17/2005 page2)