Hainan Airlines is the only major privately-owned airline in China, and the only airline in that country to earn a five-star rating from Skytrax, the UK-based air travel reviews website. But HNA Group, the conglomerate that owns Hainan, has been having very public debt problems which supposedly forced the company to consider selling its flagship airline to state-run Air China last year.

The sale never happened, but if Air China had purchased Hainan Airlines, it would’ve been the biggest shakeup in the Chinese aviation industry in years. Meanwhile, HNA Group now denies that any such talks even took place, stating that “Hainan Airlines is not for sale, full stop, and never was, and even the general conversations in question about other airline assets under Hainan Airlines Holding took place months ago.” Yet the company is still in a financial quagmire.

The exact amount of HNA’s current debt remains unknown, but it’s been estimated at over $78 billion. This is mostly due to a spate of high-profile, global acquisitions the company made between the years 2015 and 2017 when the business was booming. Some of their more significant purchases included a 25-percent stake in Hilton Worldwide, full ownership of the airport ground handler Swissport International, and the purchase of 245 Park Avenue in New York City.

While those purchases had the potential for long-term revenue, it’s unlikely they could’ve generated enough revenue in the short-term to help manage the debt incurred from these years of spending. Now, HNA Group is aggressively trying to sell off some of its assets, but finding buyers for multi-billion-dollar stakes and companies take time — time that the company doesn’t necessarily have. In total, HNA has sold around $17 billion in assets this year but will undoubtedly have to sell more to meet its fiduciary obligations.

Meanwhile, Air China, which currently ranks a distant third in terms of annual passengers in China behind China Eastern Airlines and China Southern Airlines with 68.8 million passengers in 2017, would likely still jump at the chance to acquire Hainan Airlines. If Air China could add Hainan Airlines’ 2017 traffic of 37.6 million passengers to their portfolio, they would leapfrog China Eastern and China Southern’s traffic — 95.3 million and 97.4 million respectively — with a hearty total of 106.4 million passengers.


Corporate Earnings, Transportation