$4 Billion Investment for China Southern Airlines

$4 Billion Investment for China Southern Airlines

The company that controls China Southern Airline has announced that it will receive $4.3 billion in capital via three investors. This is part of the company’s plan for equity diversification.

The following entities will inject capital worth RMB 10 billion into the carrier:

  • Shenzhen Penghang Equity
  • Guangzhou Urban Construction Investment Group
  • Guangdong Hengjian Investment Holding Corporation

China Southern Air Holding stated that the capital will be utilized for overseas expansion. This is in accordance with the requirements set forth by the Central Committee of the Communist Party of China as well as the State Council. The top two government bodies of China are aiming for greater equity diversification between state-owned companies.

The airline added that the CSAH will retain its status as a state-owned enterprise, which is controlled by the Assets Supervision and Administration Commission. The CSAH will also be the leading shareholder in control of China Southern Airline. The shareholding structure details following the financial deal have not been revealed yet.

The funds will be utilized to bolster the main transportation activities of China Southern as part of the Belt and Road Initiative.

In December, the previous year, Qatar Airways purchased a 5 percent shareholding in China Southern for an undisclosed amount.

China Southern Airline is headquartered in the Guangzhou. This major Chinese city is part of the Greater Bay Area program launched by Beijing, which also includes Macau, Hong Kong and eight other major Chinese cities located in the Pearl River Delta of the Guangzhou province. This program will set up a technology-driven business hub in the region with an aim to challenge Japan’s Tokyo Bay Area and the Silicon Valley of the US.

The Belt and Road Initiative seeks to develop closer economic relations between China and countries from Southeast Asia, Africa, the Middle East, Europe and Central Asia. This is being done by carrying out massive infrastructure and transport projects in these areas.

The senior vice president of China Southern, Wu Guoxiang, stated the airline aims at becoming the largest carrier in the next 3 to 5 years. The airline will not establish an alliance with any major transport group prior to 2021.

The listed company China Southern revealed more than 50 percent decline in profits the previous year owing to rising fuel expenses. The company has been recovering and posted 4 percent increase in profits during the first quarter of this year.