The airline hasn't made a final decision on whether to push forward with either its listing plans or whether the IPO should trade in both the Chinese currency and the Hong Kong dollar, people with direct knowledge of the deal said. Hong Kong Airlines has yet to file a listing application with the stock exchange, but it is looking into a fourth-quarter IPO, the people said.
Hong Kong Airlines is controlled by Chinese conglomerate HNA Group, whose holdings include Hainan Airlines. It flies short-haul regional routes between Hong Kong and other destinations in Asia, including Phuket in Thailand, Osaka in Japan, and Chinese cities like Beijing and Shanghai.
The airline, which has a fleet of around 23 aircraft, is looking to list as it grapples with high fuel prices and competition from bigger rival Cathay Pacific Airways Ltd. Funds raised from an IPO would go toward financing its plan to buy more aircraft, the carrier had said. Hong Kong Airlines declined to comment.
While a dual-currency IPO may win some fans for its novelty, a deal such as this may be less alluring than it would have been a few years ago when the yuan was rising, according to industry experts. The yuan has fallen 2.5% against the U.S. dollar so far this year, according to FactSet.
The only company in Hong Kong that trades in the Chinese currency, Hui Xian Real Estate Investment Trust, raised US$1.6 billion in an IPO in April 2011, when the yuan was still on an upward trend. The trust company owned by Hong Kong tycoon Li Ka-shing has seen its shares fall 36% since then, with its stock underperforming Hong Kong's benchmark Hang Seng Index by 1.2%.
Still, if the Hong Kong Airlines listing goes ahead, it will be a coup for the Hong Kong Stock Exchange, which has been encouraging companies to list in both currencies in the past couple of years.
The exchange has been eager to have stocks listed in both currencies to cater to the growing demand outside China for investment products denominated in the yuan, also known as the renminbi, though none have taken up this option yet. The stock exchange has said previously that a platform to accommodate yuan-denominated dual-currency IPOs is ready.
WH Group, the Chinese pork producer that made headlines last year with the acquisition of U.S.-based Smithfield Foods Inc, at one point was considering a dual-currency listing earlier this year. It went ahead with an attempt to raise up to US$5.3 billion in a solely Hong Kong-dollar float in April, but pulled that listing when demand fell through. The company, formerly known as Shuanghui International Holdings, is now looking into reviving its listing attempt, again just in Hong Kong dollars, people familiar with the situation previously said. It wasn't immediately clear why WH didn't go the dual-listing route.
Hong Kong Airlines, set up in 2006, has attempted to fly long-haul but pulled out due to weak demand.
It cut services to Moscow and suspended its all-business class flights to London in 2012. It is now solely focused on short-haul routes, of which Chinese cities dominate. It flies in total to around 20 Chinese cities.
Source: Wall Street Journal by Prudence Ho, Yvonne Lee and Joanne Chiu
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