February 5, 2018 / 7:36 AM / 19 days ago

China's Okay Airways seeking investment from foreign airlines

SINGAPORE (Reuters) - China’s Okay Airways is inviting foreign airlines to take a stake in the privately owned carrier as it prepares for a possible stock market listing in mainland China between 2020 and 2021, the company’s president said on Monday.

Li Zongling told Reuters in an interview that Okay Airways wanted a “reputable” foreign airline to take an upwards of 10 percent stake in the Chinese carrier and that it has held talks with airlines in Europe and Asia. He declined to identify the airlines.

“I hope international airlines who are interested in the Chinese market and in private Chinese carriers will look at becoming a shareholder in Okay Airways,” he said on the sidelines of a conference ahead of the Singapore Airshow, citing Emirates and Singapore Airlines as examples of airlines he considered reputable.

He said that Okay Airways had ambitions to become a more international company, with plans to eventually launch routes to Europe and America, and believed that having a foreign airline as a shareholder with aid that goal.

“Joining an airline alliance will not be as effective for our international business as it would have in the past,” Li said, adding that he hoped to find a partner this year.

He also said that Okay Airways was currently in talks with a Southeast Asian carrier to set up a joint venture company in the region so that they could expand their route network.

Li said that the airline was in a position to accept foreign investment because it was still wholly privately owned, though it plans to seek a stock market listing between 2020 and 2021 after it opens its base at Beijing’s new airport and receives the first of five Boeing 787-9 Dreamliners that it bought for $1.4 billion at list prices in November.

The company is also seeking Chinese state investors to become shareholders as Beijing encourages closer ties between the country’s private and state firms as part of a mixed-ownership drive, he said.

Okay Airways was China’s first privately owned carrier when it began operations in 2005 and is headquartered in Beijing. Its fleet of 26 Boeing 737 planes serves more than 70 domestic and regional destinations and carried around five million passengers last year.

Li added that he expected local government subsidies that have encouraged airlines to launch numerous new routes from Chinese cities to overseas destinations to begin shrinking this year, saying that the country’s aviation regulator expressed a lack of support for the practice at a recent work conference.

While Okay Airways has been a beneficiary of these cash subsidies, he said that ultimately they were not sustainable and he expected authorities to shift to other types of incentives to support the market.

Reporting by Brenda Goh; Editing by Muralikumar Anantharaman

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