China Southern Airlines: Intensive Financing Supports Recovery in 4Q 2020

On November 19, 2020, China Southern Airlines announced a plan of issuing CNY 15 billion corporate bonds with a maturity of up to 10 years. The funding from this issuing will be used to replenish free cash flow, invest in new projects, and repay banks’ loans. The targets of the bonds are professional investors in inquiry mode.

The airline company conducts over 20 financing activities so far this year. In October and November only, it raised two massive funding including convertible bonds of CNY 16 billion on October 15 and short-term corporate bonds of CNY 10 billion. The funding is mainly used to support the company operating activities. According to the Q3 report of 2020, in the first three quarters, China Southern Airlines gets a net operating cash flow of CNY 3.98 billion, plummet 84% year-on-year.

As China emerges from the shadow of COVID-19, China airline companies show a steady recovery trend. China Southern Airlines gains CNY 711 million net profit in Q3 2020 and even becomes the only one that returns to profitability among China's "Big Three" airlines (Air China, China Southern Airlines, and China Eastern Airlines). With the appreciation of CNY and the low-level oil price, the company may report more profit recovery in Q4 2020.