updated 12/28/2006 9:03:39 AM ET 2006-12-28T14:03:39

China’s Spring Airlines is in talks with Citigroup Inc. and others to sell stakes as the privately owned carrier looks to outside capital to fund expansion, two sources familiar with the matter said on Thursday.

The 17-month-old budget carrier has got initial approval from the government to buy 10 single-aisle A320 aircraft and hopes to raise roughly $384 million (3 billion yuan) via share placements and an initial public offering to help foot the bill, a source at the airline told Reuters.

“We have discussed share placement deals with several potential investors including Citigroup,” the source said.

“We want to sell no more than 20 percent to one or several investors. Talks with Citigroup have passed the initial stage.”

Another industry source said the talks between the world’s top financial service provider and the Chinese no-frills carrier could possibly lead to a stake purchase.

Citigroup’s spokesman in Hong Kong declined to comment.

China has become a magnet for global investment firms and private equity funds, which are flocking to cash in on the country’s breakneck economic growth.

Earlier in the year, a Citigroup-led consortium won control of Guangdong Development Bank in a $3.1 billion deal. Wall Street bank Goldman Sachs announced two deals in November — buying into China’s top auto glass maker, Fuyao, and air conditioner maker Midea — valued at over $200 million in total.

Unlike larger rival China Eastern Airlines, which wants to bring in Singapore Airlines as a strategic investor, Spring Air prefers financial investors, which would most likely choose to cash in when the carrier floats its shares.

The Shanghai-based carrier hopes to complete the share placement deals before a stock market listing envisaged for 2009, one executive said.

Spring Air operates a fleet of four leased A320 aircraft serving over a dozen domestic routes. For 2006, its first full year in operation, the carrier is expected to book over 20 million yuan in profit and 485 million yuan in sales, he added.

Copyright 2012 Thomson Reuters. Click for restrictions.

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