Hainan Group or HNA Group Co. Ltd, the Chinese conglomerate with headquarters in Haikou, Hainan, China, started 2018 with financial difficulties and the situation has continued to worsen as Airbus has now officially announced that it will be putting the Group’s orders on hold due to the inability of the company to pay for its ordered aircraft.
Hainan Group’s Financial Struggles
Chinese Hainan Group’s carriers include Hainan Airlines, Tianjin Airlines, Lucky Air, Capital Airlines and others. The Group is also an active stakeholder in a number of other airlines across the world. Although HNA Groups began with strong intentions of becoming among the largest and most stable companies in the world by 2030, the company has shown a variety of weaknesses and has suffered from a financially challenging time period recently.
The total debt of the company is currently estimated to be around $93 billion, which have accumulated over the past few years. The main contribution to the debt was made via growth processes and investments in Deutsche Bank and Hilton Hotels, which were part of a company strategy to expand the business reach and gain more stability. As part of the investments, HNA Group spent $40 billion and in 2017 sought help and advice from the government as its inability to cope with the financial difficulty became evident for the market.
In June 2018 the government and HNA Group negotiated on the company’s financial assistance and HNA currently receives help from a number of banks owned by the state.
Airbus Puts HNA’s A330 Orders on Hold
The aircraft manufacturer Airbus has stated that it does not intend to enter the role of the financier in the case with HNA’s inability to provide the required sum for its aircraft orders. As a result, Airbus has refused to complete the scheduled deliveries of the six A330 ordered aircraft. Such an unfavourable situation is estimated to result in financial loss for Airbus of $10,000 per day on a single airplane due to storage and maintenance fees. The total worth of the six purchased planes is estimated at $1.6 billion. This will negatively influence the manufacturer as its finances have already been hurt by struggles to deliver more than 100 A320neo aircraft orders on time due to engine failures.
Airbus is not the only company affected by HNA’s monetary challenges as aircraft leasing specialists have also been influenced by late payments from the company. HNA’s Hainan Airlines, Lucky Air and Beijing Capital Airlines have all failed to make payments on time, while Tianjin Airlines is currently in negotiations to spread out its payment deadlines.
With the newly agreed on financial backup from the government, hopes are that HNA Group will manage to recover, although some industry experts believe that its fade away from the market may be the better option.