Juneyao Air plans to raise RMB3.565 billion (approx: US$574 million) to expand its fleet and enter the online travel industry to open new sources of revenue.
Juneyao Air follows up IPO with private offering
Juneyao Air’s operations rapidly expanding
Juneyao Air plans to make a private placement of up to 58 million shares to up to ten specified investors including private funds, securities traders and insurance companies. The offering price will not be lower than 90% of the carrier's benchmark average trading price at 20 days prior to the transaction or no lower than RMB61.58 per share. Juneyao Air plans to use the funds to purchase four A320 series aircraft with three backup jet engines and two flight simulators, and launch the Taotrip leisure travel platform and repay bank loans.
Juneyao Air doubled the size of its fleet during a period of rapid growth from 2011 to 2014. Its share of passenger volume rose from 1.08% in 2006 to 15.10% in 2013 and it is expected to maintain steady growth in transportation capacity over the next five years by adding 90 aircraft to its fleet between 2015 and 2020. It will use the two Shanghai airports as its headquarters and hubs and leverage strategic differentiation to compete and grow its market share by targeting high-end corporate, travel and leisure passengers.
Disney to spur Juneyao Air’s growth
A securities analyst speculates that Juneyao Air is accelerating its fleet expansion in preparation for the opening of the Shanghai Disney Resort. If Shanghai Disney draws 15 million visitors a year, it could lead to a 33% jump in Juneyao Air’s profits, significantly higher than the 23% growth estimated for China Eastern Airlines or the 10% growth for Spring Airlines.
A Juneyao Air spokesperson said the carrier's share of passenger volume in 2014 was 2.09%, up 16.11% compared to the 2012 level. Landing and take-off volume share at Shanghai airports went up from 6.73% in 2012 to 8.04% in 2014.
Entering the online travel industry
Juneyao Air will also use RMB165 million (approx: US$26.57 million) of the funds raised to set up a leisure travel platform, Taotrip, in conjunction with Shanghai-based online travel community 117go. The partners will leverage technical support, management, capital and joint marketing for ongoing expansion to establish Taotrip as a high quality “smartphone X generation” leisure travel ecommerce platform.
117go's "Travel On The Road" App
A Juneyao Air spokesperson said Taotrip will leverage the carrier’s strength in transportation to complete its service loop and offer one-stop services to users with direct transportation to destinations and links to local tourism supplier partners and resources via the platform.
By entering the online travel market, Juneyao Air will generate synergy for its flight operations and also expand its service scope to eventually establish an O2O presence in leisure travel.(Translation by David)
