By XUE Bingbing
Shandong Airlines Group was delisted from the Shenzhen Stock Exchange on Monday, marking the end of its 23-year journey in the world of public equity. Shangdong was the first carrier in China to be forcibly delisted.
High flying small investors
The civil aviation industry was hit exceptionally hard by the pandemic and smaller airlines are involved in life-or-death struggles. Unable to rescue themselves, many have sought external support.
Yunnan Ruili Airlines turned to Wuxi local state-owned assets board and was renamed Sunan Ruili Airlines. Other local airlines have received capital injections from local governments, but Shandong Airlines didn’t get much help.
The carrier was listed on the B-share market. B-shares were initially aimed at attracting foreign capital but as mainland companies opted for overseas listings, the role of B-shares has diminished to the point of stagnation.
Unable to raise funds and expand through the market, Shandong Airlines relied on bonds and loans. In June 2021, the company applied to China Development Bank for an emergency loan of 2.6 billion yuan (US$3.9 billion). With a duration of only one year, the loan provided temporary relief but was not a long-term solution.
In March, after nine months of negotiations, Air China acquired the company for 33 million yuan and offered to buy all outstanding shares in the airline in order to delist, angering many small shareholders who refused to cooperate.
In the end, only a tiny number of publicly-traded shares were acquired, but in any case, Shandong Airlines faced mandatory delisting due to two consecutive years of negative net asset value.
Complex aeronautic maneuvers
Before obtaining full control, Air China was the largest shareholder in Shandong Airliners. The current chairman of the airline, XU Chuanyu, has a background in the Air China system.
The acquisition and subsequent delisting are good for Air China. Shandong Airlines had a fleet of well over 100 Boeing 737 aircraft. The Air China fleet will now be the biggest in the country, exceeding 900 aircraft, surpassing China Southern Airlines.
The national flag carrier will now gain more prime-time slots and improve its market share in East China.
