Air China and China's other big airlines are seeking government aid to cope with hefty losses from high costs and weak demand, industry sources familiar with the situation said on Monday.
Shares in the country's three biggest carriers soared on the news, with the official Shanghai Securities News reporting that the parents of China Eastern Airlines and China Southern Airlines were likely to receive 3 billion yuan ($440 million) each in cash injections. The sources said, however, that discussions were still under way with a decision expected by the end of the year.
The government has already moved to bolster sectors in troubled industries such as steel and textiles with tax breaks or reductions for exports, and the Shanghai Securities News said other industries may receive cash hand-outs as well. Beijing also announced a 4 trillion yuan stimulus plan earlier this month to boost the country's economy, although it was unclear whether industry support measures would be considered part of that package.
"(Air China's parent) China National Aviation is actively communicating with the government about a cash injection," a source close to the airline group told Reuters. He did not indicate how much aid the company was seeking. The sources declined to be identified due to the sensitivity of the request. A spokesman for China Southern's parent company confirmed that it had applied for government aid but said nothing had been decided yet and the carrier would get a decision from the government by the end of the year.
CNAC and the China Eastern group declined to comment. China Southern's Hong Kong-listed shares jumped 11.9 percent to close at HK$1.22, while China Eastern surged 7.6 percent to HK$0.99 and Air China was up percent 2.5 percent at HK$2.05, compared with a 0.1 percent dip in the benchmark Hang Seng Index.