Hainan Airlines bid to buy 40% stake in Zest Airways

Zest Air president Alfredo Yao said there are currently three entities that have expressed intention to invest in Zest Air.

"There are two, maybe three. We are still choosing. There was supposed to be an agreement already with one but then there came along two more. So, there’s going to be a beauty contest,” said Yao.

One of the interested airlines, said Yao, is Hainan Airlines (HNA). Based in Hailou, HNA is the largest privately owned air transport company and the fourth-largest airline in terms of fleet size in China. It operates scheduled domestic and international services on 500 routes from Hainan and nine locations on the mainland, as well as charter services.

In choosing a partner, Yao said it is important that the prospective partner should have the financial muscle and the technical expertise.

"Whoever we will end up with should be able to contribute something to Zest Air whether financially or maybe for our [initial public offering], or even help us in servicing our aircraft. It is better to have a partner,” Yao said, adding that Zest Air can’t do it by itself amid the rising cost of jet fuel and spare parts.

He declined to name the other two interested airlines except that they are from within the region.

"Hopefully, it can be finished within the year,” said Yao when asked of the target timetable for the closing of the deal.

The country’s foreign investment law limits foreign ownership of a domestic airline to 40 percent.

Zest Air, formerly known as Asian Spirit, is in its fourth year of operation. Yao said the IPO may take place possibly in the next two years.

The airline currently enjoys a 20-percent market share. Yao said this should grow to 25 percent by the end of the year.

"We are looking at servicing more passengers,” said Yao.

The airline’s fleet is composed of 12 Airbus A320. He said Zest Air is also looking at buying three airplanes per year. Each aircraft costs approximately $40 million.

Zest Air flew 2.3 million passengers last year, of which 2.1 million are domestic passengers and 200,000 from international operations, and made P6 billion in revenues.