Covid-19 and the HNA Group restructuring resulted in Hainan Airlines posting a monstrous 64 billion yuan (US$9.9bn) loss for 2020. It also reported a first-quarter 2021 loss of 2.6 billion yuan. Hainan Airlines Holding was a cornerstone of the Chen Feng business empire which drove cash and deposits for overseas investments, alas no longer.
HNA’s business restructuring hit the airline harder than COVID-19 in truth, as provisions estimated at 30 billion yuan were made for deposits placed with its parent company, account receivables with affiliated parties and financial guarantees, according to its annual report. It also incurred investment losses totalling about 22 billion yuan from asset classes ranging from trust products and equities to properties, compounded by COVID-19.
Now Private Juneyao Air has announced that it is setting up an investment firm with strategic investors to bid for “bankrupt HNA Group’s assets”. Juneyao said in a securities filing yesterday that its investment arm, Shanghai Juneyao Aviation Investment Co and strategic investors with whom it has a long partnership, will set up Shanghai Jidaohang Aviation Technology Partnership Enterprise to be capitalised at a maximum 30 billion yuan ($4.64 billion), subject to approval by regulators. It is likely that one investment partner is China Eastern Airlines, but that is speculation at this stage.
It is widely understood that HNA assets are the prime target for this new entity, and indeed why not. So long as the new venture can secure assets without onerous conditions attached, they will be able to secure jobs and connectivity and that should please Chinese authorities greatly.
Meanwhile, HNA Group is reported to still be looking for private capital to avoid the liquidation of Hainan Airlines. It has four private companies actively participating in the bidding process for airline assets, but it is understood that those bids are well short of original expectations at HNA Group.