Air China

CAAC on lookout for new ways to tap capital markets

PUBLISHED : Thursday, 01 August, 1996, 12:00am
UPDATED : Thursday, 01 August, 1996, 12:00am

The Civil Aviation Administration of China (CAAC) is set to publish plans to tap foreign and domestic capital markets to improve airport infrastructure and expand the country's air fleet over the next five years.

Plans include listing more mainland airlines overseas, selling bonds and launching investment funds, according to a soon-to-be published five-year blueprint for the industry.

The aviation regulator will also encourage certain Chinese airlines to sell shares to domestic institutional investors and lure foreign investment to Chinese airports.

The CAAC, which drew up the five-year plan, has vowed to spend more money on upgrading air control systems and strengthen staff training to improve its safety and punctuality records.

According to the five-year plan, the CAAC intends to 'greatly' expand its international routes and strengthen controls over domestic airlines to compete with foreign airlines.

It will seek co-operation with foreign airlines on code-sharing and joint route operation.

It aims to direct most foreign investment in its infrastructure and technical upgrades.

The CAAC said it would try to get more foreign government loans and other soft loans, particularly third and fourth-tranche Japanese government loans, which are its traditional sources of foreign investment.

By the end of last year, it had used more than US$3 billion in foreign government loans.

The CAAC wants to expand its sources of foreign funding by setting up funds and issuing bonds on international markets.

It will 'actively and steadily' encourage Chinese airlines to set up joint ventures with foreign airlines and other foreign investors.

Massive investment would be needed over the next five years for China to sustain a projected annual increase of 14.4 per cent in air transport to 2000.

It expected passenger traffic to grow by an annual 14.3 per cent, while cargo and mail was expected to grow 14.6 per cent a year.

Mainland sources said several regional airlines were talking with foreign investors following the sale of a 25 per cent stake in Hainan Airlines to US investment funds controlled by financier George Soros. That marked the first time a Chinese airline had sold a stake to foreign investors.

They said the CAAC would not mind more regional airlines selling interests to foreign investors so long as foreign investment did not exceed the limit of 25 per cent of the airlines' share capital.