Hong Kong Airlines is again considering an initial public offering (IPO), according to a report by Reuters based on its view of a document that states the HNA-owned carrier is seeking to raise $350 million through the issue of new shares and $550 million via convertible or tradeable bonds. Should the plan go ahead, the new issuance would expand the carrier’s equity base by 22% and value it at $1.6bn, says Reuters.
The concerned parties have not commented publicly but the debt burden of HNA Group is well known to the market and a capital increase for one of its airlines would assist the group significantly.
Hong Kong Airlines originally intended to IPO in September 2014 when it applied for listing approval from the Hong Kong Stock Exchange for a $500 million Chinese yuan and Hong Kong dollar-denominated IPO, which would have been the city’s first dual-currency public offering [reported here]. The application lapsed in March 2015, and plan to resurrect the listing in June that year were also delayed [read here]. This latest application may have more staying power due to the continuing need for capital for the airline as fuel prices rise and the airline continues to fend off competition from Cathay.
Meanwhile, the International Air Transport Association (IATA) has released global passenger traffic data for April 2018 showing that demand (revenue passenger kilometers or RPKs) rose by 6.2% compared to April 2017, which was down from a 12-month high of 9.7% in March. Comparisons with the year ago period are impacted by developments a year ago – including the comparatively late timing of Easter in 2017, which boosted April traffic. April capacity (available seat kilometers or ASKs) increased by 5.9%, and load factor climbed 0.2 percentage point to 82.3%, which was a record for the month of April, surpassing last year’s record of 82.1%.
"Demand for air transport continues to be above the long-term trend. However, increases in airline cost inputs, most notably fuel prices, means that we are unlikely to see increased stimulation from lower fares in 2018, compared to previous years," said Alexandre de Juniac, IATA’s Director General and CEO.
April international passenger demand rose 4.8% compared to April 2017. All regions recorded year-over-year traffic increases but all were behind the pace of growth reported in March. Total capacity climbed 4.9%, and load factor slipped 0.1 percentage point to 81.4%.
Asia Pacific carriers posted an 8.5% traffic rise in April, strongest among the regions. It was the first time since December 2017 that Asia-Pacific airlines led in growth. Passenger traffic has continued to trend upwards at an annualized rate in the region of 10%, supported by robust regional economic expansion and ongoing growth in the number of flight options, which translates into time savings for passengers. Capacity rose 7.6% and load factor improved 0.6 percentage point to 81.0%.
Middle East carriers saw demand rise 4.1% in April. Capacity climbed 3.2% and load factor rose 0.7 percentage point to 77.2%. The seasonally-adjusted upward trend in traffic has strengthened since the start of the year, aided by healthy growth on the key routes to/from Asia and Europe, as well as continuing signs of recovery on the market segment to/from North America. Annual comparisons are likely to become more favorable in coming months, owing to the disruptions caused by the proposed travel bans to the US and the since-lifted ban on large portable electronic devices in the year-ago period.
European airlines’ April traffic increased 3.4% compared to the year-ago period. While this was down compared to the 9.8% year-over-year growth recorded in March, demand picked up in April in seasonally-adjusted terms. Capacity rose 4.0%. While load factor dipped 0.5 percentage point to 84.6%, it still was highest among the regions.
North American airlines posted a 0.9% demand increase compared to April a year ago, which was sharply down compared to the 9.5% growth experienced in March. Comparisons to the year-ago period are distorted by the huge pick-up in traffic in April 2017. A bounce back is expected in May, supported by the relatively strong economic backdrop in the US. Capacity climbed 2.4%, and load factor fell 1.2 percentage points to 80.7%.
Latin American airlines experienced a 6.4% rise in April demand compared to the same month last year. Capacity rose 7.5% and load factor slipped 0.8 percentage point to 81.4%. While the year-over-year traffic increase in April was roughly half that of March, the bigger picture remains bright, with seasonally-adjusted traffic volumes having grown at double-digit annualized rates over the past six months.
African airlines’ had a 5.1% traffic increase in April. Capacity rose 4.6%, and load factor edged up 0.4 percentage point to 72.8%. The upward demand trend remains strong, helped by continuing signs of improvement in the region’s largest economies: Nigeria and South Africa. This is only the fourth time in the past 41 months that both economies have been on an upward trajectory at the same time.