Cash-stripped Hainan Airlines Group has applied for bankruptcy, ending a battle for survival lasting for years. The step will allow it to write off high losses and work on the company’s financial recovery. In a letter to staff published on the corporate WeChat account, HNA Group Chief Gu Gang asked his 100,000 employees for “solidarity and hard work to jointly pull the conglomerate through its darkest hour.”
The latest financial report published by the Group, covering the first six months of 2019, showed debt totaling US$109 billion (706.7 bn yuan). “We’ve been fumbling in a pitch-black tunnel for three years,” Gu stated in his letter to the staff.
Result of hubris
In March 2020, the highly indebted Chinese conglomerate was put under state control. The reason for this step were fears by the Beijing government that the company would no longer be able to meet its financial obligations and could thus become a threat to the entire Chinese financial system.
HNA’s current miserable situation is the result of hubris. The Himalayan high debts were piled up during the Group’s aggressive acquisition spree mainly financed by loans, in this way securing significant shareholdings in Swissport, Hilton Hotels, Deutsche Bank, Ingram Micro, Hahn Airport, and dozens of other brand name assets. HNA Group founder Chen Feng’s ambition was to catapult China’s largest private conglomerate into the Fortune 100 list of the world’s leading enterprises by assets. This strategy failed completely, leading to the appointment of Gu Gang as head of the Group a year ago, and followed last week by the ousting of HNA founder Chen Feng, who is no longer involved in any key issues.
The Hainan-based conglomerate was incepted in 1993. At the zenith of development, the company held stakes in 14 airlines and operated a fleet of 900 aircraft. However, due to the increasingly oppressive debt burden, the company had to make emergency sales in order to remain solvent and secure its survival. Yet, the ongoing shortage of money in combination with the onset of the Covid-19 pandemic have ultimately led to the creditor protection that has now been applied for.
Hahn is not affected
According to Gu, filing for Chapter 11 protection was without alternative. Now, “restructuring is the only way we can be reborn,” he wrote to his staff. “What we see now, is a glimmer of light, and I believe that when we get out of the tunnel, we will see the sun shining,” reads his optimistic message.
Not affected by the forthcoming restructuring process is Frankfurt-Hahn Airport, official voices told CargoForwarder Global. Since 2017, HNA holds 82.5% of the operator’s shares, while the state of Hesse owns the remaining 17.5%. Fueled by the Chinese Silk Road project, the airport could play an even greater role in air freight transports in the future.
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