China Southern Airlines (CZ, Guangzhou) and China Southern Air Holding Company (CSAHC) have entered into a Capital Increase Agreement to inject CNY500 million (USD 72 million) into their finance company, Southern Airlines Group Finance Company.

A document submitted to the Hong Kong Stock Exchange (HKEX) states that almost CNY 350 million (USD 50.3 million) will be used to increase the registered capital of the Finance Company to just over CNY 1 billion (USD 144 million), while the remaining CNY 150 million (USD 21.5 million) will used to increase its capital reserve.

The Finance Company is not currently, and will not become, a subsidiary of China Southern as a result of the increase. The increase will give the airline a 25.23% share of the Finance Company while non-wholly owned subsidiaries of China Southern - Xiamen Airlines, Shantou Airlines, Zhuhai Airlines, and Nanland – have agreed to waive their rights of capital contribution.

By agreeing to the capital increase, China Southern believes that it will both allow the finance company to expand, and also to enjoy the benefit of profits through its holdings of 25.277% directly, and 8.701% indirectly through its four subsidiaries.

The agreement is awaiting regulatory approval.