Air China to spend $2.3 billion on planes and terminal

China Travel Services

HONG KONG Air China, which is preparing for an initial public offering next month, plans to spend 18.7 billion yuan, or $2.3 billion, buying aircraft and building an airport terminal, according to research by one of the sale's arrangers.
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The Beijing-based company, China's largest international carrier, plans to buy 46 planes by 2006, expand existing services and construct a new terminal at Beijing airport, according to research by Merrill Lynch issued this week. Air China may raise at least $750 million from the share offering to expand and repay debt, people familiar with the plan said in October.
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Chinese airlines have been expanding their fleets as residents of the mainland grow richer and travel more.
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Air China, which will have 150 aircraft by the end of this year, needs to expand its fleet to maintain market share.
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"Air China won't face major problems selling its shares because travel demand will keep rising from now to 2007," said Koh Choy, a fund manager at Golden Honour Assets Management. "While it's a dying sector in the U.S., Asian airliner operators are usually more efficient."
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Passenger traffic in China, the world's fastest-growing market, is expected to increase 8.1 percent in each of the next 20 years, after rising 14 percent in the past two decades, according to estimates by Boeing.
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Air China had the second-lowest costs among 17 global and regional airlines sampled by Merrill last year, because of lower wages and more efficient operations. The company was ranked third in terms of profit margins, Merrill said. Air China plans to reduce or cancel some low-traffic routes to cut operating costs by 2007, the research said.
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Air China may be valued at between 18.4 billion yuan and 23.9 billion yuan, or 9.8 times to 12.5 times its 2004 profit, the research said.
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The company may raise as much as $895 million should it offer 31 percent of its shares in the offering.
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Next year Air China and competitors such as China Southern Airlines and China Eastern Airlines may add more flights and the number of seats available is expected to outstrip passengers, Merrill said. That may crimp profit.
.
Air China's profit growth may slow to 2.2 percent next year and 2.3 percent in 2006, according to the Merrill research. The Beijing-based company may earn 2.29 billion yuan of net income this year, 14 times the 160 million yuan it earned before its assets were reorganized, Merrill said.
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Air China had 34.4 billion yuan of debt at Dec. 31, or 81 percent relative to its capital, according to Merrill's research.
.HONG KONG Air China, which is preparing for an initial public offering next month, plans to spend 18.7 billion yuan, or $2.3 billion, buying aircraft and building an airport terminal, according to research by one of the sale's arrangers.
.
The Beijing-based company, China's largest international carrier, plans to buy 46 planes by 2006, expand existing services and construct a new terminal at Beijing airport, according to research by Merrill Lynch issued this week. Air China may raise at least $750 million from the share offering to expand and repay debt, people familiar with the plan said in October.
.
Chinese airlines have been expanding their fleets as residents of the mainland grow richer and travel more.
.
Air China, which will have 150 aircraft by the end of this year, needs to expand its fleet to maintain market share.
.
"Air China won't face major problems selling its shares because travel demand will keep rising from now to 2007," said Koh Choy, a fund manager at Golden Honour Assets Management. "While it's a dying sector in the U.S., Asian airliner operators are usually more efficient."
.
Passenger traffic in China, the world's fastest-growing market, is expected to increase 8.1 percent in each of the next 20 years, after rising 14 percent in the past two decades, according to estimates by Boeing.
.
Air China had the second-lowest costs among 17 global and regional airlines sampled by Merrill last year, because of lower wages and more efficient operations. The company was ranked third in terms of profit margins, Merrill said. Air China plans to reduce or cancel some low-traffic routes to cut operating costs by 2007, the research said.
.
Air China may be valued at between 18.4 billion yuan and 23.9 billion yuan, or 9.8 times to 12.5 times its 2004 profit, the research said.
.
The company may raise as much as $895 million should it offer 31 percent of its shares in the offering.
.
Next year Air China and competitors such as China Southern Airlines and China Eastern Airlines may add more flights and the number of seats available is expected to outstrip passengers, Merrill said. That may crimp profit.
.
Air China's profit growth may slow to 2.2 percent next year and 2.3 percent in 2006, according to the Merrill research. The Beijing-based company may earn 2.29 billion yuan of net income this year, 14 times the 160 million yuan it earned before its assets were reorganized, Merrill said.
.
Air China had 34.4 billion yuan of debt at Dec. 31, or 81 percent relative to its capital, according to Merrill's research.
.HONG KONG Air China, which is preparing for an initial public offering next month, plans to spend 18.7 billion yuan, or $2.3 billion, buying aircraft and building an airport terminal, according to research by one of the sale's arrangers.
.
The Beijing-based company, China's largest international carrier, plans to buy 46 planes by 2006, expand existing services and construct a new terminal at Beijing airport, according to research by Merrill Lynch issued this week. Air China may raise at least $750 million from the share offering to expand and repay debt, people familiar with the plan said in October.
.
Chinese airlines have been expanding their fleets as residents of the mainland grow richer and travel more.
.
Air China, which will have 150 aircraft by the end of this year, needs to expand its fleet to maintain market share.
.
"Air China won't face major problems selling its shares because travel demand will keep rising from now to 2007," said Koh Choy, a fund manager at Golden Honour Assets Management. "While it's a dying sector in the U.S., Asian airliner operators are usually more efficient."
.
Passenger traffic in China, the world's fastest-growing market, is expected to increase 8.1 percent in each of the next 20 years, after rising 14 percent in the past two decades, according to estimates by Boeing.
.
Air China had the second-lowest costs among 17 global and regional airlines sampled by Merrill last year, because of lower wages and more efficient operations. The company was ranked third in terms of profit margins, Merrill said. Air China plans to reduce or cancel some low-traffic routes to cut operating costs by 2007, the research said.
.
Air China may be valued at between 18.4 billion yuan and 23.9 billion yuan, or 9.8 times to 12.5 times its 2004 profit, the research said.
.
The company may raise as much as $895 million should it offer 31 percent of its shares in the offering.
.
Next year Air China and competitors such as China Southern Airlines and China Eastern Airlines may add more flights and the number of seats available is expected to outstrip passengers, Merrill said. That may crimp profit.
.
Air China's profit growth may slow to 2.2 percent next year and 2.3 percent in 2006, according to the Merrill research. The Beijing-based company may earn 2.29 billion yuan of net income this year, 14 times the 160 million yuan it earned before its assets were reorganized, Merrill said.
.
Air China had 34.4 billion yuan of debt at Dec. 31, or 81 percent relative to its capital, according to Merrill's research.
.