ACCC Okays Virgin Australia, HNA Aviation alliance; U.S. Regulators Query Chinese Parent

The Australian Competition and Consumer Commission (ACCC) has approved a five-year alliance between Virgin Australia and HNA Aviation, along with the latter's affiliates HK Express and Hong Kong Airlines.
The alliance includes a codeshare agreement with Hong Kong Airlines which offers connectivity to 11 destinations across the airlines' flight networks.

HNA’s co-founder and co-chairman Chen Feng
HNA’s co-founder and co-chairman Chen Feng

Since receiving the interim authorisation from the ACCC in March, Virgin Australia has introduced services between Melbourne and Hong Kong.
Virgin Australia Group CEO and managing director John Borghetti said: "HNA Aviation, Hong Kong Airlines and HK Express are very well regarded in the aviation industry and we are excited to work closely with them to strengthen the important tourism and trade connections between Australia, Hong Kong and mainland China."
In a separate development, Hong Kong Express earlier this month announced it would ban the transport of ivory cargo, the first airline in Hong Kong to do so. Last year, HK Express was the first Hong Kong based airline to ban shark fin cargo.

Querying the HNA ownership structure
Meanwhile, the announcement of the Virgin Australia-HNA Aviation alliance coincides with increased scrutiny by regulators in the U.S. and Europe who are querying the ownership and corporate structure of the HNA Group, the parent company of HNA Aviation.
A report in the New York Times last week, suggested that the HNA Group may have violated China’s securities laws on “connected” transactions, as it did not make certain disclosures in its regulatory filings, including its opaque relationship with a New York-based company, the Pacific American Corporation (PAC).
HNA previously maintained that PAC is an independent company that buys engines, spare parts and other airline equipment for HNA’s subsidiary, Hainan Airlines. HNA has said that it has no ownership stake in PAC.

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Aggressive acquisition strategy
However, the New York Times report said that previously unreported corporate documents show a closer relationship. PAC is run by the son and younger brother of HNA’s co-founder and co-chairman Chen Feng, and was once controlled by HNA.
The younger brother of HNA’s co-chairman was also instrumental in helping create the initial ownership structure of HNA Group, these records show, through the use of entities set up outside China, in Hong Kong and the Cayman Islands. These offshore companies effectively obscured the control wielded by top executives and their relatives.
HNA's omission to report these links are likely to raise more questions about who ultimately controls HNA, a private company that in recent years has spent more than US$30 billion acquiring stakes in global companies like Hilton Hotels, Swissport, Deutsche Bank and Avolon, the world’s third-largest aircraft leasing company.

Nol van Fenema

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