China’s fourth-largest airline – Hainan Airlines – has transferred its core aviation business to Liaoning Fangda Group Industrial Co, its strategic investor, as the carrier’s parent company HNA Group is going through bankruptcy and restructuring proceedings. The airline said since a court’s final ruling on October 31, its reorganization process has been going on smoothly, and substantial progress has been made in risk mitigation. Liaoning Fangda Group is a Chinese conglomerate involved in business sectors such as carbon, steel and pharmaceuticals. Earlier, Liaoning Fangda won the bid to become a strategic investor of Hainan Airlines over Shanghai Juneyao Group Co, parent of Juneyao Airlines, and Fosun International, a major Chinese industry player in the tourism sector.
In March, Hainan Airlines announced an annual loss of CNY64 billion for 2020, the highest loss ever by a listed Chinese company. In January, HNA said it had received notice from the Hainan High People’s Court that creditors had sought bankruptcy as it failed to repay debts. Since 2010, HNA had been expanding its assets overseas and the total acquisitions at one point exceeded USD50 billion. It acquired stakes in around 40 major companies, including Deutsche Bank and Hilton Worldwide Holdings. HNA’s acquisition spree drew scrutiny from Chinese and foreign regulators. It started to face mounting debts due to stricter controls and liquidity concerns, and began seeking buyers for its assets.
“Hainan Airlines has been a major carrier in China and it has a fleet of about 600 aircraft. The quality of the airline business itself is good, and there is no significant problem in the airline’s operations and its safety management,” said Lin Zhijie, an aviation industry analyst and a columnist at Carnoc, a major civil aviation website in China. “HNA’s troubles are mainly caused by the huge debts in the group’s other sectors. After restructuring, it should still be a healthy asset. Yet, the company still faces several challenges, including huge debts and the negative impact from Covid-19 on the aviation sector,” Lin said. “In addition, HNA’s internal governance problems, such as a lack of internal controls and aggressive investment, still need to get further corrected. The group also needs to consider reducing losses as it owns a large number of wide body aircraft,” he said, as reported by the China Daily.
