Hainan Airlines (HU) is set for a probable shut down this year, as its parent company, the HNA Group, is expected to be taken over by the Chinese government over problems paying its employees, investors and licensing fees.

Due to HNA’s problems to meet its financial obligations, Hong kong Airport seized seven HU’s airplanes grounded at the airport. In addition, due to the ongoing coronavirus crisis, HU flights have been dramatically reduced.

On its website press room, HU states that affected by the epidemic prevention policies of destination countries, HU would temporarily cancel some flights from February 1 to March 28 in North America, Europe, Australia, and New Zealand, and Southeast Asia.

You can see the complete list of flight cancellations here.

To add insult to injury, according to a Bloomberg Law report, the Chinese government is considering selling off HNA’s core airline assets to China Eastern and China Southern as a way to contain the economic consequences of the virus outbreak.

HNA financial troubles take a toll on HU

The conglomerate, a behemoth when it comes to investment funds, has had to sell-off its airline assets to deal with its $94 billion+ debt during the last few years.

CHEN Feng, Chairman of the Board, HNA GROUP World Travel & Tourism Council.
Courtesy: Flickr images

Just in August 2019, HU sold the remaining stake it had on Brazilian carrier, Azul, for $306.25 million to a group of American investors, selling 19.3 American Depositary Shares it had on Azul at $16.15 per unit.

In 2016, the Chinese group paid $450 million for a 23.7% stake in the Brazilian carrier as part of a $50 billion acquisition spree that included stakes in Aigle Azur, Comair, MyCargo Airlines, TAP Portugal, Virgin Australia, and leasing company Avolon, among others.

According to Conrado A Asenjo, “the announcement (of the take over is) to be made as early as tomorrow. Divestment of assets is still unclear (re Hilton) but airline assets are to be sold to China Southern and China Eastern, most likely.”

The conglomerate owns HU, Beijing Capital, Fuzhou Airlines, Lucky Air, Tianjin Airlines, Urumqi Air as well as stakes in Hong Kong Airlines, and minority holdings in Comair, Azul Brazilian, Aigle Azur, and TAP Air Portugal.

Article written by Helwing Villamizar