Air China Aims to Raise $2.8B via Controller to Ease Debt

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Shares of the national airline took a nosedive after it announced plans to raise up to CNY20 billion (approximately USD2.8 billion) from its main shareholders through a private placement.

As of 1:55 p.m. in Shanghai, the stock traded down 7.4% at CNY7.92 (USD1.11). Its shares listed in Hong Kong fell 6.2% to HKD5.73 (roughly 74 cents USD).

The company will issue over three million shares in Shanghai at a price of CNY6.57 (about 92 cents USD) each to China National Aviation Holding Corporation and its subsidiary, China National Aviation Capital Holding, according to a recent announcement.

This private placement price is 21% lower than the previous closing price in Shanghai but around 18% higher than the closing price in Hong Kong. The funds will go toward repaying debt and boosting working capital.

The company intends to better manage its interest-bearing debt, optimize its asset and liability structure, enhance financial stability, strengthen its capital base, support business growth, improve profitability, and bolster resilience against risks. These measures aim to underpin the airline’s pursuit of high-quality development, the airline stated.

In recent years, the airline’s capital structure has faced considerable challenges. Although its leverage ratio decreased to 87.9% at the end of last month from 92.7% at the end of 2022, it remains relatively high. As of September 30, the airline’s total debt stood at CNY307 billion (around USD43.2 billion).

Since the onset of the COVID-19 pandemic, the airline has executed two private placements—one in August 2022 and another in December 2023—raising a combined CNY23 billion. These funds have been used to acquire new aircraft and support working capital. Both placements involved investments from CNAHC and its subsidiaries, with the first also attracting 21 other investment institutions.

In the third quarter of this year, the airline reported operating revenue close to CNY49.1 billion, a modest 0.9% increase from the same period last year. However, net profit declined 11.3% to nearly CNY3.7 billion (around USD520.4 million).