China Southern Looks To Parent To Cut Debt

June 4, 2012

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China Southern Airlines, the country's largest airline by fleet size, said on Monday its state-owned parent was considering injecting capital into the company to lower its debt level.

The airline, which did not provide details of the amount being considered, was also studying a non-public issue of new shares to its parent, China Southern Air Holding Company, it said in a statement to the Hong Kong stock exchange.

Based in China's southern city of Guangzhou, China Southern's net debt stood at CNY75.8 billion yuan (USD$11.9 billion) at the end of 2011, while its ratio of net debt to total equity was 201 percent last year compared with 211 percent in 2010.

"It's a surprising move and the injection could be a sizeable amount as trading of the stock will be suspended," said Kelvin Lau, an aviation analyst at Daiwa Securities.

China Southern said it had requested a trading suspension from June 5.

The airline last month reported a 74 percent slide in first-quarter net profit to CNY319 million yuan due to a slowing domestic economy and rising jet fuel prices.