China to take over HNA as coronavirus hits business: report

February 20, 2020 09:49
The Hainan government is reported to be in talks to take control of the indebted HNA Group. Photo: Bloomberg

China plans to take over HNA Group and sell off its airline assets as the coronavirus outbreak has crimped the indebted conglomerate's ability to meet its financial obligations, Bloomberg reports, citing people familiar with the matter.

The government of Hainan, the southern island province where HNA is based, is in talks to take control of the group, the report said.

An announcement could come as soon as Thursday, according to the report.

Under the emerging plan, China could sell the bulk of HNA’s airline assets to the country’s three biggest carriers -- Air China, China Southern Airlines, and China Eastern Airlines, Bloomberg said.

HNA directly controls or holds stakes in a number of local carriers, including the flagship Hainan Airlines.

The government's plans come as HNA has for years been struggling with debts as well as soaring borrowing costs.

HNA Group was once one of China’s most aggressive dealmaking firms, spending US$50 billion to build an empire that once spread from Deutsche Bank to Hilton Worldwide, Reuters noted.

The company began unwinding those bets two years ago to shift the focus to its core airlines and tourism businesses, after drawing scrutiny from Beijing and other overseas regulators.

HNA Group has in recent weeks come under pressure from the new coronavirus outbreak in China which has forced airlines to cancel thousands of flights.

Hainan Airlines and other airlines have tried to cut their losses by putting foreign pilots on unpaid leave, Reuters reported on Tuesday.

Hong Kong Airlines, part-owned by HNA, said last Friday that it will cut 400 jobs.

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