(Yicai Global) Aug. 31 -- China’s private air carriers are embarking on a wave of mergers and acquisitions as the fallout of Covid-19 chokes off their cash flow. Northeast China-based Longjiang Airlines is also taxiing toward this fate, and is set to have 98 percent of its shares auctioned off, a local court announced on Aug. 28.

The regional carrier’s involuntary sale will take place on Sept. 29, the court declared on Aug. 28. The 61 percent of shares held by Harbin Yaxiang Aviation Construction Investment and the 37 percent owned by Harbin Xiangyu Gold Products Sales are to go under the hammer en bloc.

Longjiang’s assets are CNY1.2 billion (USD174.8 million) and its liabilities CNY800 million (USD116.5 million). Its court-assessed value is CNY411 million and the starting bid is CNY329 million.

"Many airlines have changed hands In recent years, mainly because the civil aviation sector has a high bar when it comes to resources and scale. Small and medium carriers have difficulty making money because of deficient resources, limited scale and high operating pressure,” civil aviation industry insider Lin Zhijie told Yicai Global, adding, “Once a downward spiral of high oil prices, depreciating exchange rates or weak market demand sets in, mergers and reorganizations become inevitable."

The carrier got approval from China’s Civil Aviation Administration in 2014 and started flying in 2017. It has two used and one new A320 aircraft and two A321s.

Longjiang’s current liabilities are about 97.4 percent of its total, and financial pressure is thus correspondingly high, the court remarked in the auction notice. Major shareholders have recently discussed a sale with outside parties. Several investors have also expressed a willingness to buy, Yicai Global has exclusively learned.

If the pandemic goes on, more airlines may join this wave of M&As, either off their own bat or under the gun, Lin noted.

Editors: Zhang Yushuo, Ben Armour