(Yicai) Oct. 31 -- Shares of Air China plunged after the Chinese flag carrier said it plans to raise up to CNY20 billion (USD2.8 billion) from its controlling shareholders through a private placement.

Air China [SHA: 601111] was trading down 7.4 percent at CNY7.92 (USD1.11) as of 1.55 p.m. in Shanghai today. Its Hong Kong-listed stock [HKG: 0753] dropped 6.2 percent to HKD5.73 (74 US cents).

Air China will issue more than three million shares in Shanghai at a price of CNY6.57 (92 US cents) apiece to China National Aviation Holding Corporation and its subsidiary China National Aviation Capital Holding, the Beijing-based firm announced yesterday.

The private placement price is 21 percent lower than Air China’s closing price in Shanghai yesterday, but around 18 percent higher than that in Hong Kong.

The proceeds will be used for debt repayment and working capital replenishment, which will help the company control its interest-bearing debt levels, optimize its asset-liability structure, improve financial stability, strengthen its capital base, secure funding for business development needs, enhance profitability and risk resilience, and provide strong support for its high-quality development, Air China noted.

In recent years, Air China’s capital structure has been under significant pressure. Despite its gearing ratio declining to 87.9 percent at the end of last month from 92.7 percent at the end of 2022, it remained at a relatively high level. The airline had a total debt of CNY307 billion (USD43.2 billion) as of Sept. 30.

Air China has completed two private placements since the Covid-19 outbreak, one in August 2022 and one in December 2023, raising a total of CNY23 billion to buy new aircraft and supplement working capital. The investors in both private placements were CNAHC and its subsidiaries, with the first one also attracting 21 other investment institutions.

Air China reported an operating revenue of nearly CNY49.1 billion in the third quarter of this year, up 0.9 percent from a year earlier, according to its latest financial report issued late yesterday. Its net profit shrank 11.3 percent to nearly CNY3.7 billion (USD520.4 million). 

Editor: Futura Costaglione