China's new privately run LCCs are looking to strategic investors as a method of raising capital, as it is becoming increasingly difficult to access traditional sources of bank lending owing to the airlines' less-than-stellar financial performance.

Juneyao Group announced that its Juneyao Airlines subsidiary is seeking a strategic investor to aid in the carrier's long-term development. The announcement was made after Juneyao said the airline was profitable in April and expects to post a full-year profit as well. Actual results were not disclosed.

Juneyao CEO Huang Hui said that "the right candidate" should be an investment bank with ample experience in the air transport industry to aid both domestic and future international expansion.

Earlier this year, Shanghai-based Spring Airlines revealed its intent to seek a financial investor when it posted a 2006 net profit of RMB20 million (US$2.6 million) on revenue exceeding RMB500 million. Interestingly, in 2004 Spring rejected a proposal by Singapore Airlines to acquire a 40% stake.

Spring spokesperson Zhang Lei said that the company has talked with Merrill Lynch, Goldman Sachs and Citigroup but no deal has been reached. He noted that while the LCC is seeking new investment, it is not interested in selling a majority stake. Insiders speculate it will have to raise at least RMB3 billion to support last October's order for 10 A320s.

The desire to attract investment without sacrificing control played out in the failed deal between Okay Airways and Korean Air. In August 2005, Okay signed a letter of intent with Korean under which KAL and another Korean company were to have acquired 49% of the airline, but both sides walked away over the issue of control. "Korean Air wants to assume the presidency and take up equal seats on the board with us, which we can't accept. Even if they don't have controlling stake, conflicts will still arise," Okay Chairman Liu Jieyin explained.