Air China is expected to launch its long-planned initial public offering (IPO) in the coming months, giving it funds for expansion as the Chinese government allows more competition.

The Beijing-headquartered Chinese flag carrier has wanted to have an overseas stock listing for years like the two other airlines in the "big three" club: China Eastern and China Southern Airlines. These carriers are both listed in Hong Kong and New York and Air China is also expected to list in these two financial centres. It recently took a step closer after China's Assets Supervision and Administration Commission granted approval for the establishment of a new limited liability joint stock company, Air China Ltd.

The IPO is expected either late this year or early next year. State-run media have said that around 28% of Air China Ltd is likely to be sold through the offering, raising around $500 million.

Air China group airlines have been expanding their operations over the past year with additional aircraft and new routes, in part to better compete with foreign rivals. China's government has been giving foreign airlines more rights to operate to the country in recent years, putting more pressure on the country's state-controlled carriers.

At the time of the establishment of Air China Ltd, it took a 69% stake in Hong Kong-listed China National Aviation (CNAC), which is the main shareholder of Air Macau and Dragonair.

Both CNAC and Air China are ultimately controlled by state-owned China National Aviation Holding. Analysts regard the transfer of CNAC shares directly to Air China Ltd as a move aimed at making the airline more attractive to investors ahead of its public offering. The stake was previously held by China National Aviation Corp Group, which is another wholly owned subsidiary of China National Aviation Holding, but this company now has an indirect stake as it has been given 22.5% of Air China.

Among other assets, CNAC has a majority stake in Air Macau and a 43% stake in Hong Kong's Dragonair. Air China at the beginning of this year said it booked a net profit of 93 million yuan ($11 million) for 2003, citing a strong second-half recovery following the containment of the SARS outbreak.

Source: Airline Business