MIAMI – Today, the creditors of the HNA Group have filed for its bankruptcy, forcing an immediate reorganization of the business.
The Group is one of China’s largest conglomerates, mostly connected to the aviation and tourism sector. The firm has been characterized as one of the most aggressive dealmakers of the market after using US$50bn on a global acquisition spree which included companies such as Deutsche Bank and Hilton Worldwide.
Three years ago China’s central government and some overseas regulators forced the company to sell many of its shares and concentrate on the aviation and tourism industry. In the following years, the firm constantly grew and finally owned over 2,300 companies. As of June 2019, HNA Group’s total assets reached ¥980.62bn (US$151.77bn) with its gross liabilities hitting ¥706.73bn.
After the COVID-19 pandemic hit global travel demand, HNA’s cash flows significantly narrowed and the Group asked the local government to assist in resolving several liquidity issues. Finally, the firm, whose flagship carrier is Hainan Airlines (HU), was warned by its creditors about such a move due to inadequacy to pay its debts.
The Story of HNA Group and the Future of Hainan Airlines
Since 1993, the HNA Group has featured 14 airlines, including Lucky Air (8L), HU and Grand Air China (CN), and more than 900 aircraft. On the Group’s acquisition spree, several investments took place in multiple aviation related companies.
Such investments included purchase of stakes on lessor company Avolon, through HNA Group leasing arm Bohai Leasing, as well as stakes on Virgin Australia (VA), Hong Kong Airlines (HX), Comair (MN) Brazil’s Azul (AD), and even Tap Air Portugal (TP). The list also includes handling companies such as Gategroup and Swissport.
Prior to HNA’s request for financial reconstruction, a number of agreements had been signed regarding the sale of Firm’s shares of smaller airlines to local governments. Although, the financial health of the company raised concerns and eventually the procedures halted. These selling agreements seem to play a crucial role for the following reformation of the company when at the same time they create the financial basis on which HU could be saved.
For the time being, HU reports that all of its operations are maintained.
Featured image: Tony Bordelais/Airways. Article source: Reuters