(Yicai) June 27 -- The operator of Hainan Airlines, China's fourth-largest carrier, is getting closer to a forced delisting due to a slump in stock price amid the nation's slow recovery of outbound tourism.

Shares of Hainan Airlines Holding [SHA: 600221] were trading 1.8 percent down at CNY1.1 (15 US cents) in Shanghai as of 1.53 p.m. The drop exceeds 20 percent this month. Despite turning a profit this year, the airline is one of the victims of the sluggish recovery of China's aviation industry after the Covid-19 pandemic. Since December 2022, the cumulative stock price decline has reached about 40 percent.

If the price falls below CNY1 and stays there for 20 straight trading days, the stock will be delisted, based on mainland bourses' rules. Since the beginning of this year, seven companies have been delisted for this reason.

Senior executives of the southern airline said on the Shanghai Stock Exchange's investor interaction platform recently that the company places great emphasis on maintaining its listing and has already formulated a related plan.

As the risk of delisting looms, the closer a listed company's share price approaches CNY1, the lower the willingness of investors to buy, and the greater their willingness to sell in panic, analysts said.

Since June 17, stocks listed on the two mainland bourses of Shanghai and Shenzhen with prices below CNY1.5 have plunged by nearly 9.2 percent on average, according to Wind data. Among these, there are 18 stocks that have dived more than 20 percent. In comparison, the average decline for all listed firms is 5.2 percent.

Companies that are at risk of delisting due to a low equity price tend to lack the ability to sustain profitability, a Shanghai-based private equity professional told Yicai. But Hainan Airlines Holding does not currently face operational risks, and the company's profitability is also continuously recovering, the source added.

Hainan Airlines Holding managed to turn a profit in the first quarter of this year. Its net profit tallied CNY686 million (USD94.4 million) while revenue reached CNY17.5 billion (USD2.4 billion), up 33 percent from a year earlier. However, the second quarter is predicted to be harder for the whole civil aviation industry due to seasonal factors.

In December 2021, private enterprise China Fangda Group became the actual controller of HNA Group, the majority shareholder of Hainan Airlines Holding, through asset restructuring.

Editors: Tang Shihua, Emmi Laine