Shanghai Air To Raise USD$146 Mln In Placement

Shanghai Airlines plans to raise CNY999.99 million yuan (USD$146.3 million) via a private placement of shares to bolster its working capital as it struggles with an economic slowdown and mounting losses.

The airline, more than 35 percent owned by the Shanghai city government, said on Wednesday it would place 222,222,200 shares with Jinjiang International Holdings at 4.50 yuan per share.

The company's shares closed at 5.24 yuan per share on February 4, before they were suspended pending discussions with shareholders of a plan aimed at reducing its asset-liability ratio.

The placement will increase Jinjiang International's stake to 23.62 percent from 7.93 percent, making it the airline's second-largest shareholder, although the city government will remain the biggest shareholder.

The airline said last month it expected its net loss for 2008 to have at least doubled from the previous year's CNY435 million loss, as the passenger travel market weakened.

It also reported CNY170 million in unrealized fuel hedging losses as of December 31 following a drop in fuel prices in the second half of last year.

"Judging from current operating conditions, the company expects to continue facing relatively heavy operating pressures and financial difficulties into the first quarter of 2009," the airline said in a statement to the Shanghai Stock Exchange.

Speculation has mounted in recent months about the possibility of a merger between Shanghai Air and China Eastern, one of China's three biggest carriers and also based in Shanghai.

Government and industry sources have said that the authorities were discussing the possibility of brokering a merger between the two.