Hong Kong Air Delays IPO Over Market Conditions

January 9, 2012

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Hong Kong Airlines has decided to delay its initial public offering, originally scheduled for early this year, until the third quarter because of stock market volatility, a company official said on Monday.

The IPO, which the company had said was expected to raise about HKD$5 billion (UD$643.9 million), has been postponed as advised by Goldman Sachs, deputy general manager and company spokesperson Eva Chan. She said: "Goldman recommended postponing the IPO a bit as they find the market volatile."

The Hong Kong-based carrier is controlled by Hong Kong Airlines Holding, which counts Hainan Airlines and Hainan Airlines' parent HNA Group among its shareholders.

The airline's decision to delay the offering comes on the back of growing volatility in global equity markets that has sapped investor demand for new listings and caused a 51 percent plunge in Asia-Pacific IPO issuance in 2011 from 2010.

The market could weaken further this year because of continuing concern over recovery in Europe and other major economies, with consulting firm PricewaterhouseCoopers forecasting a 26 percent drop in IPOs in Hong Kong in 2012.

Such a development would dent the city's status as one of the world's main capital-raising hubs.

Hong Kong Airlines, which currently has a fleet of 14 aircraft including six A330-200s and eight Boeing 737-800s, is taking delivery of eight to 10 aircraft this year, including two A330-200s this month, Chan said.

The company, which will start daily flights between Hong Kong and London in March, had also ordered 10 A380 jumbo jets, which will be delivered from 2015, she added.

The A380 superjumbo has a list price of USD$375 million.

The European Union's launch of a new carbon trading scheme this year to include all airlines using EU airports will have no impact on the deliveries, Chan said, without elaboration.

China's major airlines have said they will refuse to pay any charges under the EU scheme, while other Asia Pacific carriers, already battling a weak travel market, are likely to pass on the extra cost to passengers.

The Emissions Trading Scheme (ETS) was launched in 2005 as one of the major pillars of the bloc's efforts to combat climate change. From January 1, all airlines using EU airports are included in the cap-and-trade scheme.

Cai Haibo, deputy secretary-general of the China Air Transport Association (CATA), said last week that the industry body would not rule out taking legal action or resort to asking the Chinese government to take retaliatory measures.

Hong Kong-based Cathay Pacific Airways and some other Asian airlines, facing a sluggish economy and weak cargo demand, said they might impose surcharges or increase airfares to counter the ETS impact.