Fresh from its strong debut on the Hong Kong and New York stock exchanges in late July, China Southern Airlines has revealed plans to spend nearly US$1.3 billion on a fleet expansion and general modernisation programme over the next three years.

The carrier will spend some US$560 million on adding 19 aircraft to its current 70-strong fleet, pending clearance from the Chinese authorities. And nearly US$25 million will go towards upgrading the capabilities of the Gameco maintenance centre, in which China Southern currently has a 50 per cent stake. But the bulk of the capital will be spent on modernising a wide range of equipment and systems used by the carrier.

China Southern, which reported a 227 per cent lift in net profit in 1996 to US$93.2 million, made a solid debut on the Hong Kong stock exchange at the end of July - the news of the expansion plans immediately lifted the share price to 63 cents from the issue price of 61 cents. At presstime stock was trading around the 65 cent level.

In New York, the carrier's American Depositary Receipts (ADRs) quickly lifted 2.7 per cent to US$31.50. One ADR represents 50 Hong Kong shares. The public portion of the company's Hong Kong offer was 2.44 times subscribed, while applications for the international placement amounted to 13 times the number of shares on sale.

The airline raised US$624.5 million from the dual listing, despite some concerns about safety procedures at the carrier following the May crash of a B737-300 at Shenzhen in which 35 people died. The carrier is still awaiting the results of a government investigation into the accident.

Tom Ballantyne

Source: Airline Business