JUNEYAO Airlines, a small privately owned carrier, aims to raise 1.9 billion yuan (US$304 million) in an initial public offering in Shanghai to fund its fleet expansion.

    The Shanghai-based carrier plans to issue up to 200 million shares, or 29 percent of its enlarged total equity.

    Proceeds of the listing will fund the purchase of seven Airbus Group NV A320 jets and back-up engines.

    Founded in 2006, Juneyao Airlines, 88 percent owned by the namesake group company, has been profitable in the past three years, with net income rising 34 percent to 336.5 million yuan in 2013.

    During the three-year period, it also received 273.5 million yuan in subsidies from local governments desperate to attract airlines.

    In a prospectus released last week, Juneyao Airlines warned about the risk of fluctuating fuel prices, which accounted for 47.5 percent, 51.1 percent and 49.8 percent of its costs in 2011, 2012 and 2013 respectively.

    A depreciating yuan also poses risk for the carrier, which has 502 million yuan in U.S. dollar-denominated debts.

    Spring Airlines Co., China’s first and biggest budget carrier, has also applied for a US$400 million initial public offering in Shanghai to fund its fleet expansion.

    China’s civil aviation market faces intensifying competition. The government has moved to liberalize the domestic airline market and, for the first time, promote the growth of budget airlines though air travel in China is booming. (SD-Agencies)