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Hainan Airlines to receive cash infusion

HAINAN Airlines will receive a 3 billion yuan (US$440 million) cash injection to help it increase capacity and reduce debts amid the economic downturn.

The country's fourth-largest carrier by fleet size, backed by American billionaire George Soros, will issue 300 million new shares each to the government of Hainian Province and HNA Group, its parent, at about 5 yuan each and collect 3 billion yuan in total.

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

The sale of shares will help trim the carrier's debt-to-asset ratio to about 81 percent from 86 percent, according to the carrier.

The airline's shares have been suspended from trading since May 19 when it announced that it was planning a share placement deal. Its share price was 5.58 yuan at the time of suspension.

The injection follows similar infusions that China Eastern Airlines and China Southern Airlines received.

The airlines secured a combined total of 10 billion yuan in cash aid from the central government to help weather the drop in air travel demand and volatile fuel costs.

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

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


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