The years of debt-fueled acquisitions of the HNA group end in shambles | Analysis


It may have started life as an aviation group, but by the time the creditors came forward with bankruptcy filings, the Chinese HNA Group was a massive conglomerate with large interests; from real estate to logistics; from aviation to financial services, the company had a finger in every pie.

In the 20 years since its inception, the group – built on the foundations of the flagship Hainan Airlines unit – has grown rapidly in China and beyond in a spending spree fueled by debt.

But on January 29, the juggernaut came to a screeching halt: the group revealed that it had received a formal notice that so far anonymous creditors had filed for bankruptcy and reorganization with the High Court. People’s Republic of Hainan “on the grounds that we cannot pay the debts owed,” HNA Group said.

He added that he would cooperate with the authorities and “actively promote the liquidation of the debt“, while ensuring that his various units continue to function normally.

A day later, Hainan Province Vice Governor Shen Danyang visited the group’s headquarters to discuss, among other things, the company’s financial situation.

He stressed that the group’s predicament would affect “thousands of people,” but sought to play down the idea that this was the end of the road: “The reorganization of bankruptcy is not… liquidation – the center is not broken, but upright. It’s a reorganization and a rebirth, ”Shen said.

The Hainan provincial government, which in 2020 launched a lifeline through a joint task force to address HNA’s liquidity risks, also reiterated its support.

Hainan_Airlines_Boeing_787-8_B-2730_ (24078538431)

Amid the specter of bankruptcy and financial failures, the group has also quietly returned to its beginnings as an aviation conglomerate. Indeed, a check over the last few months of the HNA Group’s website shows only mentions of its “core air transport business”, and curiously omits any mention of its past forays into other industries.

The group describes itself as both a “multinational enterprise group” and a “local aviation company” concerned with developing the local market in Hainan.

But the group’s current situation is far from the bullish years of the mid-2010s, when it embarked on a wave of aggressive acquisitions both domestically and abroad.


The HNA Group’s aerospace portfolio is currently tied to a group of Chinese carriers – masked by a notoriously opaque ownership structure. Besides Hainan Airlines, HNA Group owns – both fully and partially – other Chinese airlines like Beijing Capital Airlines, Air Changan, Suparna Airlines, as well as the low-cost carrier West Air and the top charter operator. Deer Jet range, which has a VIP -configured Boeing 787 – registration 2-DEER – in its fleet.

But his portfolio grew for more than a decade, as he gained interests in aviation around the world.

Some of HNA Group’s overseas airline investments
Airline name The country Involvement of the HNA group Actual status Remarks
Hong Kong Airlines Hong Kong 60% stake in the transporter in 2006 In operation Hainan Airlines Holdings now owns part of the airline
Hong Kong Express Airways Hong Kong Purchased 45% of the capital in 2006 In operation Sold the carrier to Cathay Pacific; renamed HK Express
Airlines of the world of Africa Ghana Incorporated in 2010; HNA’s initial shareholding unknown In operation HNA Group will own 70%
blue Eagle France Acquisition of 48% of the capital in 2012 Interrupted activities Filing for bankruptcy in 2019
Azul Brazil Bought 23.7% of the capital for 450 million dollars in 2015 In operation Shareholding sold in 2018
Comair South Africa Acquisition of a 6.2% stake in the airline In operation Shareholding sold in 2018
Virgo Australia Australia Acquisition of 13% of the capital in 2016 In operation Underwent voluntary administration in 2020; now operating under new owners

One of her first major acquisitions in the aviation industry was in 2006, when she ventured into neighboring Hong Kong to buy shares in what was then known as CR Airways. The HNA Group ended up taking about 60% of the carrier, and it was renamed Hong Kong Airlines. The strategy was to expand its presence in Hong Kong, connecting the city to points in China and beyond.

In the same year, HNA Group also acquired shares in Hong Kong Express, which operated a small fleet of regional jets. The new ownership paved the way for its rebranding as a low cost carrier – and sister unit of Hong Kong Airlines.

In 2009, the carrier announced plans to start a new carrier in the port city of Tianjin in northern China. The move resulted in the transformation of HNA’s regional unit, Grand China Express, into a full-service operator, with the Tianjin government co-investing in the new company.

Around the same time, a consortium led by the HNA Group finalized the purchase of the leasing unit of Allco Finance Group, based in Australia, allowing it to expand into the leasing industry. .

In 2010, HNA Group entered the MRO business, forming a new company known as GCA Technik from the maintenance division of Hainan Airlines.

The group then ventured into Africa, integrating in 2010 the Ghanaian airline Africa World Airlines, which began operations in 2012 using a fleet of Embraer ERJ-145s.

African World Airlines_ERJ145

But things didn’t really start until later in that decade, when the now-engulfed bank-lending HNA Group took stakes in several companies outside of China.

In 2012, the HNA group made history as the first Chinese airline to invest in a European airline, when it took a 48% stake in the French regional carrier Aigle Azur, becoming its second shareholder. .

In 2015, HNA-owned leasing company Bohai Leasing acquired rival Irish lessor Avolon in a $ 7.6 billion takeover: $ 2.6 billion. dollars to the company, plus Bohai assumed about $ 5 billion of Avolon’s debt.

The same year, HNA invested 450 million dollars in the Brazilian Azul for a stake of 23.7%, in a partnership which was to allow the latter to penetrate the Asian market. It also acquired a 6.2% stake in South African carrier Comair, its second investment in Africa.

July 2015 also saw the purchase of ground handling company Swissport for 2.73 billion Swiss francs ($ 2.81 billion).

There was also no slack in the following years: in 2016, it took a 13% stake in Virgin Australia for A $ 159 million ($ 121 million), plus an 80% stake in Virgin Australia. Swiss maintenance company SR Technics for an undisclosed amount.

In 2017, it bought an 82.5% stake in Frankfurt-Hahn Airport in Germany – the HNA Group’s first investment in a non-Chinese airport. It has also invested in Galaeo International Airport in Rio de Janeiro in Brazil.

At that time, HNA Group already had interests in areas other than aviation, including hospitality, where it took a stake in the Hilton Group; as well as the tech sector, where he bought distributor Ingram Micro for $ 6 billion; and interests in the leasing of shipping containers and truck trailers, both acquired from General Electric. Its current non-aircraft assets include several luxury properties and hotels in China, and part of an artificial island off the coast of Hainan.


In 2017, it was reported that HNA Group had CNY 1 trillion in assets, with its expansion showing no signs of stopping.

But this is not the case, in part thanks to new measures by the Chinese government, announced in 2017, to minimize the exposure of private domestic companies to foreign investment.

The HNA group, along with three other conglomerates, has come under regulatory scrutiny and several banks that handled the company’s foreign investments have suspended loans to the group.

The measures hit HNA hard – in 2018 it became clear that the group was facing a cash crunch. Reports of unpaid aircraft leases appeared at the end of 2017, and a few months later, S&P Global Ratings downgraded the group’s solvency. By that time, he had already accumulated $ 86 million in debt.

It was reported that the group was looking to sell real estate and other assets in its portfolio to access additional liquidity and meet interest repayments.

The same year, HNA Group sold its shares in Comair and gave up its stake in the Brazilian Azul. He also disposed of assets in other non-aerospace companies, including real estate in Hong Kong and Australia, the holdings of Ingram Micro and Hilton Group, as well as its stake in Deutsche Bank and the rental business of TIP Europe trailers.

The death of co-founder and former president Wang Jian, who died in an accident in France in 2018, while on a business trip added to his financial difficulties.

The HNA Group’s troubles had a ripple effect on its subsidiaries – Hainan Airlines itself struggled for most of 2018, battling heavy losses and numerous changes in its management. The carrier was recently listed as a potential target for consolidation in the Chinese airline market.


Hong Kong Airlines, meanwhile, has come under scrutiny by the city’s civil aviation authorities over its own financial health, amid rumors of possible liquidation. The HNA Group then sold HK Express to Cathay Pacific.

Aigle Azur, of which HNA Group was the main shareholder, filed for bankruptcy in September 2019 and was liquidated a few weeks later after failing to find a buyer.

In February 2020, the besieged group threw in the towel and asked for help from the Hainan provincial government to turn the situation around.

Divestments continued, however: Swissport passed to a new owner in December 2020 after a restructuring, effectively wiping out the participation of HNA Group.

The coronavirus outbreak, which was first discovered in China, made matters worse for HNA Group, ultimately resulting in the bankruptcy application filed in late January.

While it’s not clear how the HNA group will emerge from the final episode, it’s unlikely that they’ll ever be the high-profile giant he once was.

Report amended to clarify timing of HNA Group’s liquidity issues.

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