China’s largest carrier is back buying aircraft as Southern Airlines sells bonds to fund its order of Airbus’ narrow-body jets
- China Southern Airlines is raising US$2.37 billion through convertible bonds to buy 11 planes and engines
- China Southern will buy nine A321neo and two A319neo planes from Airbus, using them to augment the 24 Boeing 737 MAX aircraft grounded since 2019
China Southern Airlines, operator of the country’s biggest aircraft fleet, is back in the market buying new planes and engines, resuming its expansion mode after putting six months of an air travel slump behind it.
The carrier is issuing up to 16 billion yuan (US$2.37 billion) of convertible bonds, using two-thirds of the proceeds to buy 11 planes, components and towards maintenance. The remainder of the funds raised will be used to buy back-up engines and replenish its liquidity, according to a statement by the airlines, based in the Guangdong provincial capital of Guangzhou.
China Southern plans to add two types of narrow-body jets to its fleet of 857 aircraft, booking two A319neo and nine A321neo planes from Airbus. The 11 new planes are expected to add 1.9 billion yuan in annual revenue, China Southern said.
“Having more narrow-body aircraft is the future direction as large aircraft are proved not efficient enough, ” said Toliver Ma, analyst at Guotai Junan in Hong Kong. “As more newly added routes will be short distance or regional, airlines need smaller aircraft given the demand for such routes in China still have room to develop.”
