By Clement Tan and Jill Mao
May 26 (Bloomberg) — Two decades ago, the Wang brothers sold flavored milk and yogurt to children in China. Last week, they sold shares in their airline in an IPO to become millionaires.
Their journey from a poor fishing village to the largest shareholders of budget carrier Juneyao Airlines Co., which begins trading in Shanghai this week, is a success story that mirrors China’s growth. The company is benefiting from a government plan to encourage entrepreneurship in an air-travel market that’s set to become the world’s largest over the next two decades and is currently dominated by state-owned airlines.
At its offer price, Juneyao Air will be valued at 6.35 billion yuan ($1 billion). That’s about a tenth of the market value of Spring Airlines Co., whose stock has surged over 600 percent since a January listing. Every one of the 147 mainland initial public offerings that began trading over the past year has jumped the maximum 44 percent on its first day of trading.
“Certainly, Spring Air’s crazy surge, which outperformed even the broader bull market, would be on the minds of many people,” said Zhang Qi, a Shanghai-based analyst with Haitong Securities Co. “With oil prices at low levels, airlines that are more efficiently run would make an attractive investment proposition.”
Juneyao Air, whose Chinese name means lucky, is selling 68 million shares at 11.18 yuan apiece, raising 760 million yuan from the offering. The stock begins trading May 27.
Continue reading “How to Become an Airline Millionaire, Chinese Style”
By Tim Culpan and Clement Tan
Feb. 9 (Bloomberg) — Taiwan aviation officials agreed last month to TransAsia Airways Corp.’s request to push back enforcement of a new rule aimed at forcing them to have more time to conduct pre-flight checks.
Authorities delayed until March 1 their implementation of minimum transit time requirements, introduced this year after a fatal crash on Taiwan’s Penghu islands in July, because the airline had already published its schedule for January and February, Clark Lin, director of flight standards at the Civil Aeronautics Administration told Bloomberg News.
Enforcement of the new rule, which applies only to TransAsia and its fleet of ATR 72 aircraft, would not necessarily have prevented last week’s fatal crash, he said.
Flight GE-235, with aircraft registration No. B-22816, departed Taipei’s Songshan airport on Feb. 4 for the pilots’ second trip to Kinmen near China that morning before crashing four minutes later in the nearby Keelung River. A review of the aircraft’s Technical Log Book entries, which were kept by TransAsia and released by the CAA, show the pilots may have spent just 20 minutes at the gate in Kinmen while fuel was added, before returning to Taipei.
At least 40 people have been confirmed dead and three are still missing after pilots responded to engine warning alarms before the aircraft plunged into the water.
Continue reading “TransAsia Won Delay of New Safety Rule Prior to Fatal Air Crash”
By Clement Tan
Jan. 23 (Bloomberg) — For Li Ka-shing, Asia’s richest man, 2015 is turning out to be a busy year.
Li’s Hutchison Whampoa Ltd. said today it’s in exclusive talks to buy U.K. wireless carrier O2 for as much as 10.25 billion pounds ($15 billion), three days after Li-controlled units agreed to purchase a British rail business for more than 1 billion pounds. Two weeks ago, the octogenarian announced his biggest deal yet: the $20 billion-plus merger of Cheung Kong Holdings Ltd. and Hutchison Whampoa, his two main companies.
Li, 86, isn’t done. One of his companies is among bidders for Fortum Oyj’s Swedish electricity grid, a sale people familiar with the matter have estimated could fetch more than $5 billion, and more deals may be on their way. The flurry of activity comes as the tycoon, so revered by Hong Kong’s media they call him “Superman,” reorganizes his business empire before handing over the reins to his eldest son, Victor Li.
“The profile of the company is slowly changing to becoming one where the regulated utility type of cash flow is becoming more significant,” said Kalai Pillay, head of Asia-Pacific Industrials research at Fitch Ratings in Singapore. “They will be looking at things that are more long term cash.”
Continue reading “Asia’s Richest Man Starts 2015 With $45 Billion in Deals”
By Clement Tan
Dec. 18 (Bloomberg) — China, poised to become the world’s biggest buyer of new planes, also wants to build a graveyard for old aircraft.
China Aircraft Leasing Group Holdings Ltd. is investing $2 billion to build the country’s largest plane disassembly plant in Harbin — known as China’s “Ice City” — some 750 miles northeast of Beijing. The facility starts operation in 2017 and aims to tear apart 50 jets annually after five years, Chief Executive Officer Mike Poon said at a press conference in Hong Kong today.
“The headlines for aircraft in Asia are about new deliveries, but there will be significant retirement of old aircraft,” said Will Horton, a Hong Kong-based analyst at the CAPA Centre for Aviation. “You need a robust system to catalog the parts to sell them in foreign markets.”
China’s foray into the field comes as Boeing Co., the world’s largest plane maker, also is exploring ways to wring money from the end of a jetliner’s life. With the value of parts potentially outweighing an old jet’s resale price, the $3.2 billion a year market for used aircraft parts is growing as companies discard planes well before the end of their 30-year life cycles.
The scrap-aircraft industry is concentrated mainly in the U.S., a mix of closely held operators such as Aircraft Demolition LLC — which works out of Arizona’s Pinal Airpark, known for its open-air storage — and publicly traded companies like AAR Corp.
Continue reading “Graveyard for Jets Coming in China’s Icy City as Orders Boom”
By Clement Tan
Nov. 11 (Bloomberg) — China’s Air Force’s newest fighter jet made its debut at an air show attended by senior U.S. officers in an effort to showcase its rising military clout.
The J-31 stealth fighter gave a public demonstration of its capabilities at the Zhuhai Air Show that started today in Guangdong province, according to state broadcaster CCTV and the official Xinhua News Agency. The airshow coincides with a meeting in Beijing of leaders of the Asia-Pacific Economic Cooperation forum, including U.S. President Barack Obama.
Manufactured by the Shenyang subsidiary of Aviation Industry Corp of China, also known as AVIC, the J-31 is a test of the country’s ability to deliver cutting-edge defense technology. Still largely-shrouded in secrecy, the production of the fighter could add heft to China’s sea and air expansion in the region and its push-back against decades of U.S. economic and military dominance.
“It appears to be a fifth-generation fighter and so far of course only the United States has been able to produce those,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “So in a sense, it’s kind of impressive on a superficial level.”
Continue reading “China to Debut Fighter Jet as U.S. Brass Attends Airshow”
By Alex Webb and Clement Tan
Oct. 29 (Bloomberg) — China’s plan to merge its two biggest trainmakers may allow the country to win more overseas orders with improved and cheaper offerings, increasing pressure on rivals including Siemens AG, Alstom SA and Bombardier Inc.
China’s State Council has ordered the merger of China Northern Locomotive & Rolling Stock Industry Group Corp. and southern counterpart CSR Group into one company, government officials involved in the transaction said yesterday. The pair are already the world’s No. 1 and No. 2 in rail equipment, each getting more than 90 percent of their sales from China.
“This would create a very strong global competitor,” said Ingo-Martin Schachel, a Frankfurt-based Commerzbank AG analyst who rates Siemens shares hold. “It would heighten the need for consolidation among the western manufacturers.”
The increased competition from China comes at a time when manufacturers such as Germany’s Siemens and France’s Alstom are facing constrained public spending in their home markets. China is competing aggressively for overseas rail projects, targeting emerging markets such as Africa, Eastern Europe, Latin America and Southeast Asia. Premier Li Keqiang has touted the country’s rail equipment, engineering and construction companies during overseas trips, signing several deals along the way.
Continue reading “China Merging Trainmakers Adds to Pressure on Siemens”
By Shai Oster and Clement Tan
Oct. 13 (Bloomberg) — Hong Kong’s commuters are sharing crowded subway cars with some rarefied company these days: movie stars.
As pro-democracy protests enter their third week, blocking key roads and leaving swathes of the financial center mired in gridlock, action stars, Canto-pop singers and teen heartthrobs are ditching their Lamborghinis and chauffeur-driven Rolls Royces for mass transit.
Soon after students seized the streets Sept. 26 in a campaign for freer elections, Hong Kong’s cell phone-snappers began capturing some of this entertainment capital’s most famous faces among the huddled masses on the Mass Transit Railway, or MTR, the city’s subway.
There — in goatee, baggy sweatpants and low-slung baseball cap — is “Crouching Tiger, Hidden Dragon” star Chow Yun Fat. There’s television star Jessica Hsuan stepping out of the small screen and through the subway doors. Here’s matinee idol Aaron Kwok — he sings! he dances! his hair! — posting a selfie to commemorate his first subway ride in a decade.
Continue reading “Movie Stars Swap Limos for Subway in Hong Kong Protest”
By Clement Tan, Cathy Chan and Jonathan Browning
Oct. 7 (Bloomberg) — With Hong Kong’s student-led protests dwindling and rally leaders in talks to end their 12-day campaign, a small number of demonstrators are threatening to ignore any call to abandon their posts.
Pro-democracy protesters still on the streets of central Hong Kong increasingly don’t answer to the leaders from various student groups. As people drift back to school and jobs, those who remain pose a challenge to police under pressure to remove blockades and open roadways.
“These people come on their own, they make their own mind up, they don’t respond to anyone’s appeals,” said Joseph Cheng, a political science professor at City University of Hong Kong and democracy advocate. “The police understand this very well,” he said, and know the protesters are “unpredictable.”
The resolve of some remaining demonstrators may complicate efforts to bring the standoff to a peaceful end. Any attempt to remove them by force risks backfiring, as police saw when the use of tear gas on Sept. 28 brought thousands more onto the streets. When gangs attacked demonstrators at the Mong Kok and Causeway Bay sites on Oct. 3, the protests swelled anew.
Continue reading “Pockets of Hong Kong Protesters May Defy Student Leaders”
By Brian Bremner and Clement Tan
Oct. 1 (Bloomberg) — Hong Kong’s street protests, pepper spray and tear gas have mesmerized TV and Internet audiences worldwide. Beaming them are drones with a “Made in China” tag.
The Apple Daily newspaper captured the breadth of pro-democracy demonstrations in Hong Kong using a pair of Phantom 2 drones, made by DJI Innovations, a company based in the Chinese technology hub of Shenzhen, an hour’s train ride from the former British colony. The drones can capture footage no cameraman can get on the ground, giving the world a panoramic view of the protests.
The aerial cinematography has elicited social media commentary critical of China’s efforts to have candidates for Hong Kong chief executive vetted by a committee that protesters contend answers to Chinese leadership. Praised under different circumstances earlier by people including Sequoia Capital Chairman Michael Moritz as a sign of China’s growing prowess in technology, the drones are a symbol of modern media coverage as much as a consternation for those who want to control the media.
“With these drones we now have a bird’s eye view that photographers cannot reach or produce,” said Leo Cheng, Apple Daily’s photography director.
Continue reading “Made-in-China Drones Beam Hong Kong Protests to Beijing & Beyond”
By Clement Tan and Jing Jin
Aug. 8 (Bloomberg) — Shen Zhihong arrived at Shanghai’s Pudong International Airport looking forward to a vacation at the beach only to find his flight delayed indefinitely and his holiday plans at the mercy of the People’s Liberation Army.
The 64-year-old retired professor was among thousands to have their travel obstructed last week when more than 900 flights at Shanghai’s two airports were canceled as the Chinese military staged exercises in the East China Sea. That was the most of any city in the world and more than those of the New York and Chicago metropolitan areas combined, according to Flightstats, a website that compiles airline data.
“We understand and support the needs of national defense,” Shen said as he waited to fly to the port city of Dalian with a group of former colleagues from Fudan University, where he used to teach. “But we hope there will be less and less impact on civilian flights.”
Delays at Chinese airports, ranked the world’s worst, highlight the tensions in a nation home to a swelling middle class and a ruling party with a 65-year monopoly on power that’s intent on strengthening its military. At stake is the growth of a commercial aviation market that trails only the U.S. in size and needs the PLA to cede airspace to China Southern Airlines Co. (1055) and other carriers to increase routes.
“The Western world’s been following a different model where civilians take priority,”said Geoffrey Cheng, head of transportation research at BOCOM International. “The aviation market has been developing in China at the discretion of the military releasing airspace.”
Continue reading “China Military Trump Vacationers as Drills Ground Flights”