For airlines, a top priority, or perhaps the top priority, is the maintenance and acquisition of the airplanes that make their business function at the most basic level. The only Chinese airline to receive a 5 star rating from Skytrax, a designation only ten airlines around the world currently hold, is Hainan Airlines. Yet, the premier Chinese airline is struggling to even make payments to European aircraft manufacturer Airbus for ordered aircraft. In fact, the delay in payment is causing Airbus logistical difficulties, forcing the company to hold off on delivery of a large number of aircraft. According to sources who spoke to Reuters, talks are currently underway to have at least some of the aircraft delivered to Hainan Airlines.
HNA Group has been unable to pay for the Airbus A330s it has ordered, and keeping the airplanes in storage is potentially costing Airbus millions
Neither Hainan Airlines or Airbus commented on these rumored talks. However, another source earlier stated that Airbus would be withdrawing the jet deliveries altogether and that Airbus was unwilling to serve as a financier for HNA Group.
The total value of the aircraft is estimated at well over $1 billion. $1 billion is no small sum, but this figure still pales in comparison to the estimated $94 billion of debt that Hainan Airlines’ parent company HNA Group is dealing with. However, holding the A330s that HNA Group already promised to purchase isn’t cheap for Airbus either. One estimate puts the daily cost for the European plane manufacturer at $10,000 in lost value and maintenance and storage costs per plane. In total, Airbus may be holding as many as six A330s for Hainan Airlines, Beijing Capital Airlines, and Tianjin Airlines, all owned by HNA Group.
Along with the aircraft themselves, HNA Group has also fallen behind in its payments for fuel
Delayed aircraft deliveries aren’t the only issue that Hainan Airlines and HNA Group’s other airlines have had to confront with the conglomerate’s fiduciary crisis. Back in March, it was revealed that HNA Group owed state-owned China National Aviation Fuel Group Ltd (CNAF) $476 million in fuel bills.
HNA Group has been attempting a slew of asset sell-offs and IPOs to raise liquidity to manage its debts. It’s unclear if HNA can sell off enough, and fast enough, to meet its obligations in order to ensure its core revenue source, air travel and shipping, can remain intact.
Still, none of these problems have seemingly stopped Hainan Airlines from pursuing major new routes. For example, Hainan Airlines is planning a Xi’an-Los Angeles route due to launch in December and the airline launched a new route to Edinburgh and Dublin from Beijing last month.