Two of China's leading aviation companies are embroiled in a race to list on the Hong Kong stock exchange before the territory is handed over to Beijing's control on 1 July, with sources suggesting only one is likely to succeed.

Guangzhou-based China Southern Airlines is still trying to push through its long-awaited dual listing in New York and Hong Kong before the deadline, in a move virtually identical to the partial flotation of China Eastern Airlines earlier this year.

China Southern's listing has been planned for more than two years, delayed by efforts to get its accounting systems in shape for stock exchange listings. More recently, the carrier has been plagued by legal problems.

China National Aviation Corporation (CNAC) is also in the final stages of preparation for a listing. Sources say CNAC will list its 35.8 per cent controlling interest in Hong Kong-based Dragonair as its main asset, although the corporation also holds 51 per cent of Air Macau and a controlling share in Hangzhou-based mainland operator Zhejiang Airlines.

There have been persistent reports that CNAC plans to increase its stake in Dragonair and a listing could provide the capital to do so. More recently the company has been linked with acquiring a stake in Taiwanese carrier China Airlines (see story opposite) and, with details on the listing closely guarded, the latter option should not be discounted.

CNAC, a division of China's regulatory authority, the Civil Aviation Administration of China, is emerging as a key player in the region. Apart from its airline holdings it is also heavily involved in developing the new Hong Kong airport at Chek Lap Kok, due to open next year. It has a stake in Jardine Air Terminal Services, a ramp-handling franchise at the airport, and in Lufthansa's catering division at CLK.

A source close to both China Southern and CNAC in Hong Kong refuses to say why the two are so desperate to list before the handover and only hints that there are legal benefits in doing so. He says it is likely that only one of the companies will list prior to 30 June but the other would follow shortly afterwards. Neither China Southern nor CNAC would comment.


Source: Airline Business