Parent of China Southern receives $4 billion cash injection for overseas expansion

Date: 29 Jul 2019

The holding company behind China Southern Airlines, mainland China’s largest carrier, will receive a cash injection of 30 billion yuan (US$4.36 billion) from three fund-management firms, the company said in a filing to the Hong Kong stock exchange. The money is intended to boost its war chest for overseas expansion.

In its filing, the airline said its parent, China Southern Air Holding (CSAH), had entered into a capital increase agreement with three investors “to implement the relevant requirements of the Central Committee of the Communist Party of China and the State Council on deepening the [equity diversification] reform of state-owned enterprises.”

Under the agreement, Shenzhen Penghang Equity Investment Fund Partnership, state-backed Guangdong Hengjian Investment Holding and Guangzhou City Construction Investment Group will each contribute 10 billion yuan to CSAH’s registered capital.

The move does not change CSAH’s status as one of the 96 state-owned enterprises supervised by the central government’s State-owned Assets Supervision and Administration Commission, and its role as the controlling shareholder of China Southern, the airline added. Details of the shareholding structure following the transaction were not disclosed.

The proceeds will be used primarily to boost China Southern’s core air transport business, and “in line with the Belt and Road Initiative and the Guangdong-Hong Kong-Macau Greater Bay Area strategy”.

China Southern, a listed company, last year posted a 51.4 percent decline in net profit to 2.9 billion yuan, on the back of higher fuel costs. In the first three months this year, its profit rose 4.1 percent year on year to 2.65 billion yuan.

It carried 8 percent more passengers in the first half the year than the same period last year, while cargo carried fell 1.25 percent.

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