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HNA Group Companies Rise After Firm Seeks Govt Help With Coronavirus Impact

HNA Group directly owns or holds stakes in a number of local Chinese airlines, which have suffered in recent weeks from widespread flight cancellations and plummeting demand.

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Shares in companies controlled by Chinese aviation and tourism conglomerate HNA Group rose on Monday after the firm said it had sought government help to deal with financial risk linked to the coronavirus outbreak.

HNA Group directly owns or holds stakes in a number of local Chinese airlines, which have suffered in recent weeks from widespread flight cancellations and plummeting demand.

Its flagship carrier Hainan Airlines Holding Co Ltd ended Monday 2.25% higher, while HNA Technology Investments Holdings Ltd surged almost 20%.

Other units such as HNA Investment Group Co Ltd and HNA Technology Co Ltd also saw their share prices climb.

HNA Group said on Saturday it had asked the Hainan provincial government to lead a working group to address liquidity risk after a slowdown in business linked to the coronavirus outbreak.

"The virus outbreak has hurt us severely, almost devastatingly," said an HNA executive, requesting anonymity because he is not authorized to speak to media.

"We are already a patient with critical illnesses. Now with this, we are in aggravated pain."

The group had acknowledged liquidity issues before the coronavirus outbreak started. In December, Chairman Chen Feng said HNA had faced a cash flow shortage that forced it to delay salary payments.

Its announcement on Saturday has prompted speculation in China that its assets could be carved up.

Two weeks ago, HNA-related shares rose on a media report that China's government planned to take over the debt-laden conglomerate.

"The implementation of a government acquisition would be challenging as HNA's structure is complex," Warut Promboon, head of credit research at Bondcritic, said on Monday.

"Overall, it is credit positive. HNA has grown too fast and is too big that it needs to be broken down. The restructuring will be best under state support."

ACQUISITIVE

HNA Group was once one of China's most aggressive deal-makers, spending $50 billion in a global acquisition spree that saw it take stakes in big names such as Deutsche Bank AG and Hilton Worldwide Holdings Inc.

It began selling many of its purchases two years ago to focus on its airlines and tourism businesses after its massive spending drew scrutiny from China's central government and other overseas regulators.

Analysts said issues that have affected Hainan Airlines and other HNA subsidiaries largely persist and questioned the extent to which local government involvement will help them achieve leaner books and stable profit.

On the upside, there could be an opportunity to streamline and gain market share as the industry recovers from the virus fallout, said transportation analyst Luya You at BOCOM International.

Data from Cirium showed the number of flights to, from and within China cancelled or removed from schedules totalled 347,414 from Jan. 24 through Feb. 27.

Airlines have taken various cost-cutting measures to help alleviate pressure, while the aviation regulator said it has asked the central government to introduce more subsidies for the industry.

"The coronavirus effects have hit the aviation market quite severely and will likely reshape the landscape for the latter half of 2020," You said.

(Reuters)


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