NICK IONIDES SINGAPORE The parent of China Airlines (CAL) has missed an end-of-1999 deadline for the sale of at least half of its 71% stake in the Taiwanese carrier.

Although the company claims the sale deadline has only slipped, sceptics are again doubting its resolve to give up control.

CAL's government-linked parent, the China Aviation Development Foundation (CADF), set the year-end deadline after appointing investment bank Salomon Smith Barney as its financial adviser in June. It says there has been a lack of firm buying interest primarily because of the August crash of a Boeing MD-11 at Hong Kong and the devastating earthquake in Taiwan.

The CADF claims, however, that its intention to sell off much of its stake to an international airline is firmly on track and it hopes to complete the sale sometime in the first quarter.

But many have doubted its resolve ever since discussions on the sale of the stake resurfaced in 1998 following an Airbus A300-600R crash at Taipei. Plans for a sale were first discussed in mid-1996, when it was hoped that a deal could be done by September that year. The deal never materialised and many began to question the seriousness of the CADF's pledge to give up control of the airline. Despite a renewed pledge by the CADF early in 1998 to become a "passive investor" as soon as possible, those questions have remained.

Later in 1998 it appeared the sceptics would be proved wrong, after Singapore Airlines (SIA) announced a sweeping tie-up with CAL that included the purchase of equity in the Taiwanese carrier. By January 1999, however, talks on the purchase of shares had ended in failure and the planned partnership was scrapped.

The CADF then said it would press on with sale plans with or without SIA, and claimed last November that at least three international carriers were preparing to carry out due diligence.

The foundation said at the time that it was still hoped that a shareholding alliance partner could be secured by the end of the year, but early in December it was conceded that the target could not be met.

A senior CADF official says due diligence was indeed carried out by a handful of airlines late last year, although he will not say how many or identify them. He adds that Salomon Smith Barney has arranged for more airlines to carry out due diligence, and "we remain confident" that a sale can be finalised.

Source: Airline Business