China Southern Airlines (CZ, Guangzhou) has approved Xiamen Airlines' acquisition of a 95.4% equity interest in Hebei Airlines (NS, Shijiazhuang) for CNY680million (USD106.3million). In a filing to the Shanghai Stock Exchange this week, China Southern said its subsidiary had also been given the greenlight to acquire Sichuan Airlines' 3.83% stake in Hebei for CNY69million giving it control of 99.23% of Hebei's total stock.
Xiamen is also set to make an offer to Shenyang Zhongrui Investment Co for its 0.77% stake to allow it total control over the airline.
Xiamen Airlines will inject USD130.3million into Hebei over the next three years and will also offer it a short-term loan valued up to USD162.9million.
With a fleet of two B737-700s, four B737-800s, and five E190s, Hebei operates scheduled passenger flights throughout China. However, since its rebranding from Northeast Airlines (2007) (Guilin) in 2010, it has struggled in its native Hebei province against the likes of China Eastern Airlines (MU, Shanghai Hongqiao) and Spring Airlines (9C, Shanghai Hongqiao). However, China Southern said it believes the acquisition can help the group to further develop its Hebei aviation market presence, facilitate the integration of the North China market by Xiamen Airlines, and improve its domestic route network.
Having racked up losses totalling CNY1billion (USD159million) over the last three years, Hebei's former majority shareholder, Jizhong Energy Group Co., approached Xiamen last year offering the airline its controlling stake. Jizhong Energy Group Co. itself is facing tough times and sees the divestiture as a means of cutting costs.
