China’s top airline gets $440 mln government windfall

HONG KONG – China Southern Airlines, the country’s largest carrier by fleet size, will get a $440 million windfall from the state in what may be the first in a series of payments to an ailing civil aviation sector.

China Southern’s Hong Kong stock had been suspended from trade on Wednesday, amid widespread speculation that the country’s carriers were on the verge of winning financial assistance from the government. Its Shanghai-listed shares will be suspended on Thursday.

China Southern, which competes with Air China and China Eastern in a once-booming domestic travel arena, said its parent holding company was told on Wednesday it will get 3 billion yuan ($440 million) from the government to boost its capital position.

The state-owned parent was considering transferring that capital to the listed firm. China Southern said it was also considering a share placement, though it had made no final decision and any such move required government approval.

Beijing has been known to inject cash into state-owned firms in return for a stake in their listed arms, but China Southern did not elaborate on the share placement option in a statement issued on Wednesday.

The parent companies of the country’s three largest carriers has lobbied for government aid to help them cope with hefty losses arising from historically high fuel costs and weakening demand, industry sources told Reuters this month.

Air China, China Eastern and China Southern all posted losses in the third quarter and the whole sector will most likely end the year in the red for the first time since the crisis caused by the SARS virus in 2003, an industry executive told Reuters last month.

Beijing announced a 4 trillion yuan stimulus plan this month to boost the country’s economy, but it was unclear whether industry support measures would be considered part of that package.

China Southern pledged in its statement to make a weekly report on the progress of “issues” under discussion.