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China Southern’s war chest
August 2nd 2019
US$4.4 billion investment will fund Beijing Daxing growth. Read More »
What, exactly, is US$4.4 billion? That is the sum China Southern’s parent company has received in new investments, all announced at once.
The investment of $4.4 billion is almost 80% of the market capitalisation of neighbour Cathay Pacific and 52% the market cap of Singapore Airlines, according to Bloomberg data. The sum is approximately $1 billion more than what Qatar Airways has spent in its airline investment portfolio, but does not surpass estimates of how much Etihad spent for its failed investment strategy.
The investment will be of immediate use as China Southern builds up its presence at Beijing Daxing, due to open within two months. China Southern will have approximately 40% of the slots and eventually have 200 aircraft serving Beijing. The Guangzhou-based airline is already Asia’s largest and intends to eventually have the world’s largest fleet.
China Southern’s official statement is more vague, using general terms and popular government plans. “The proceeds from the Capital Increase shall be primarily used in core air transport businesses and in line with the Belt and Road Initiative and Guangdong-Hong Kong-Macao Greater Bay Area strategy,” the airline says.
Three companies are each investing RMB10 billion, for a total of RMB30 billion (US$4.4 billion). The companies are Guangdong Hengjian Investment Holding Co., Ltd, Guangzhou City Construction Investment Group and Shenzhen Penghang Equity Investment Fund Partnership.
The investments are in line with the mixed ownership reform for state-owned enterprises. China Eastern pushed for mixed-ownership, and its investments include a stake from Delta Air Lines. Air China has a long-standing reciprocal investment with Cathay Pacific, but Air China is expected to receive further investments.
China Southern notes that even after the shareholder transaction, State-owned Assets Supervision and Administration Commission of the State Council (SASAC) will continue to be China Southern’s controlling shareholder and supervisor.
