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Cash boost for Hainan Airlines

HAINAN Airlines will get a 3-billion-yuan (US$440 million) cash injection from local government and its parent to increase capacity and reduce debts against the fallout from the economic downturn.

The country's fourth largest carrier, backed by the US billionaire George Soros, will issue 300 million new shares each to the Hainan government and HNA Group at about 5 yuan a piece and collect 3 billion yuan in total.

"Hainan Air expanded its capacity quickly in recent years and the injection can help it introduce more jets and the lower debt-to-asset ratio will enable the carrier to widen financing channels to increase its capacity," said Wu Li, an analyst with Guotai Junan Securities Co.

The share sales will help reduce the carrier's debt-to-asset ratio to about 81 percent from its current 86.93 percent, the carrier said.

The carrier has been suspended from trading since May 19 when it announced that it was planning a share placement deal. Its share price reached 5.58 yuan.

The injection follows other two air giants – China Eastern Airlines and China Southern Airlines – securing a total of 10 billion yuan cash aid from the central government to get through the downturn in air travel demand and volatile fuel costs.

Hainan Air posted a net loss of 1.42 billion yuan last year, compared with a 627 million yuan profit in 2007, due to the economic downturn and domestic natural disasters which dampened demand.

The carrier said it plans to introduce about 90 jets from this year to 2013, and this will require 24.33 billion yuan this year in bank loans and short-term financing bonds.

Its parent HNA Group said earlier this week that it plans to increase its investment in Grand China Express and change its name to Tianjin Airlines next month to cover more routes.

The registered capital for the company will increase to 1.3 billion yuan from the current 600 million yuan, with HNA holding 83.15 percent, the Tianjin government holding 15.38 percent and Hainan Air holding 1.47 percent.


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