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China Southern's parent gets 3b yuan govt funding

By Wang Ying (China Daily)
Updated: 2008-11-28 11:00

China Southern Airlines Co Ltd yesterday said its parent has received a 3 billion yuan infusion from the Ministry of Finance (MOF) to augment its capital position.

China Southern Airlines Holdings, the State-owned parent company, is likely to transfer the funds to China Southern Airlines.

The airline is also considering a private share sale, subject to further policy consultations with and review by regulators in the next 10 working days, an industry sider said.

Ma Ying, analyst at Haitong Securities said the big-ticket aid from the ministry would help the cash-strapped airline. "By the end of the third quarter, the debt-to-asset ratio of the airline exceeded 83 percent, indicating that it is in urgent need of funds," he said.

Luo Zhuping, board secretary of China Eastern Airlines admitted that the company was in the process of getting government aid. Analysts expect the firm to get the funding within a few days.

Profitability of Chinese airlines has been severely dented by the early spring snowstorm, the Wenchuan earthquake in May, the post-Olympics industry-wide slump and the ongoing global financial crisis.

Adding to their woes are the low-ticket prices and low seat kilometer utilization.

Currently, China Eastern Airlines only has a maximum seat kilometer utilization of 70 percent, while in good yield years, the rate was between 80 to 90 percent, Luo said.

The slack season will continue for another six months, he said.

For the third quarter of this year, China Eastern Airlines posted a loss of 2.292 billion yuan while China Southern Airlines recorded a loss of 810 million yuan.