HNA, China’s largest aviation conglomerate not directly owned by the state, reportedly may defer taking delivery of four 787 Dreamliner jets from Boeing as it is still saddled with mounting maturing debts.
Chinese papers say HNA may opt to sell the four wide-body airliners now taking shape at Boeing’s plants in Seattle and South Carolina to Vistara, an Indian budget carrier.
The four jets, each carrying a price tag of US$248 million – as well as the exorbitant costs incurred from delivery and pilot training – that HNA is anxious to offload is a result of its purchasing spree a few years ago. It spent tens of billions of yuan, mostly borrowed from banks, on the purchase of not only advanced long-haul jets but also sleek office towers and fancy boutique hotels overseas.
Prior to the latest rumor, HNA also leased out a pair of Airbus A350-900 wide-body jets to South African Airways, but it has yet to decide what to do with 10 extra A350s that it will soon receive from France.
HNA, together with its leading subsidiary Hainan Airlines and Hong Kong Airlines, already has a fleet of almost 100 wide-body jets, more than the number operated by state-owned China Southern and China Eastern operate. The group also controls smaller carriers like Capital Airlines, Tianjin Airlines, Lucky Air, etc.
The once spendthrift HNA has been forced to dump non-core assets since 2018, but its founder Chen Feng told reporters in March that it would soon fly out of its financial turbulence.
However, Chinese papers including the China Business News reported recently that HNA was still sitting on a debt pile of 700 billion yuan (US$99.5 billion), after factoring in all the liabilities and loans of all of its subsidiaries and joint ventures accumulated all over the years.
HNA now has a cash reserve of only about 40 billion yuan, and Hainan Airlines incurred an operating loss of 3.52 billion yuan during the first half as it struggled to fill seats on wide-body jets on international routes, while the domestic market and slots at key hubs including Beijing, Shanghai and Guangzhou were carved up by state-owned giants. Worse still, most of the numerous subsidiary airlines that HNA set up with local governments also reported losses.
Scaling down the size of its fleet to shed costs may also lead to extra fees and penalties as more than 100 jets are leased from third parties.
Hong Kong Airlines, once HNA’s trophy asset for facing off with Cathay Pacific and other premium international carriers, has also halted or reduced the number of departures on its services to North America including Vancouver, San Francisco and Los Angeles.
In October, Hong Kong’s Air Transport Licensing Authority warned of actions including the suspension of the carrier’s license in light of its ongoing financial problems, after reviewing financial improvement plans it had submitted to realize a much-awaited turnaround.
“The authority is of the view that Hong Kong Airlines’ financial situation has shown no sign of improvement, and that the situation is a matter of concern. It has decided to ask the company to take immediate and concrete steps with a view to effectively improving the financial situation shortly. Otherwise, the authority will consider taking appropriate action,” said the licensing authority in a statement.
The months of turmoil in Hong Kong and disruptions to the city’s airport have also taken a toll on the number of passengers Hong Kong Airlines flies.