China Southern Airlines is getting a big financial boost from three fund management companies, which it intends to use for its global expansion. China Southern Air Holding, China Southern Airlines' parent company, revealed in its filing to the Hong Kong Stock Exchange, that it will receive a cash injection of around $4.36 billion.
Shenzhen Penghang Equity Investment Fund Partnership, Guangdong Hengjian Investment Holding and Guangzhou City Construction Investment Group pooled together their resources and managed to give around 10 billion yuan each.
The investments were part of a capital increase agreement between China Southern Air Holding and the three companies.
In the company's filing, it was stated that the added finances were part of the group's efforts in meeting the relevant requirement of the Central Committee of the Communist Party of China and the State Council to bolster state-owned enterprises.
The agreement does not change the status of China Southern Air Holding as a state-owned enterprise under China's Assets Supervision and Administration Commission. The central government's agency will still remain as the controlling shareholder of the company. The exact details of the company's shareholding structure following the $4.36 billion investment were not disclosed.
The exact shares of the three companies held within the company were also not revealed.
According to China Southern Air Holding, the funds it will be receiving will be used to boost its core air transport business. The strategy will apparently be in line with China's Belt and Road Initiative and the country's Greater Bay Area strategy.
China Southern Airlines is currently based in Guangzhou, one of the main Chinese cities located near the Pearl River Delta. The city is also covered by the Greater Bay Area initiative, which makes it an ideal hub to become China's planned Silicon Valley and Tokyo Bay Area rival.
The airline plans to significantly increase its aviation transport infrastructure in the region, which is in line with the tenets of the Belt and Road Initiative.
According to the airline's senior vice-president for international and corporate relations, Wu Guoxiang, the company has great ambitions for the coming years. Wu explained that China Southern Airlines is aiming to be the world's largest carrier in the next three to five years.
Despite reporting net profit declines last year due to higher oil prices, China Southern Airlines managed to turn things around this year with a 4.1 percent increase in profits to $380 million in its first quarter. The company also increased its passenger capacities by more than 8 percent for the first quarter this year.
