Is The End Near For Hainan Airlines?

Is The End Near For Hainan Airlines?

35

Update: See here for the latest on Hainan Airlines’ situation.

Could Hainan Airlines’ days be numbered? Many sources suggest yes…

Hainan Airlines has long been struggling financially

Hainan Airlines is by far the highest quality airline in mainland China. As far as I’m concerned, they’re in a league of their own compared to their peers.

Unfortunately the airline has been struggling financially for a long time. Hainan is owned by HNA Group, a Chinese conglomerate that has been selling off assets for several years now.

As it directly impacts Hainan Airlines, we’ve repeatedly heard stories of them being unable to finance new planes, and even stories of them being unable to pay leases on existing planes.

Hainan Airlines 787-9 business class

HNA Group to be taken over by government?

As you’d expect, the coronavirus has significantly worsened HNA Group’s financial situation, given the number of travel related businesses they own. This has been terrible news for HNA Group (the parent company), and also for Hainan Airlines.

While nothing has officially been announced, Bloomberg Law reports that the government of Hainan is in talks to take control of Hainan Airlines parent company HNA Group, as the company is unable to meet their financial obligations.

What does this mean for Hainan Airlines?

The implications of this for Hainan Airlines remain to be seen, other than that it’s unlikely to be business as usual. Presumably there are a few ways this could play out:

  • Hainan Airlines could just be liquidated
  • The government could try to sell off Hainan Airlines to other investors
  • The government could simply merge Hainan Airlines into one of the state-owned airlines

On Weibo, rumor has it that Air China may be taking over Hainan Airlines, though it’s anyone’s guess if that will happen. Both Air China and Hainan Airlines operate most long haul flights out of Beijing, so in a way that’s a logical fit.

What we don’t know is what a takeover of Hainan by Air China would actually look like. Would Air China take over Hainan Airlines’ planes and staff, or would they essentially just shut down Hainan Airlines and eliminate a competitor?

Air China may take over Hainan Airlines

Others suggest that China Eastern or China Southern could take over the airline. At this point it’s all speculation.

This could also impact Hong Kong Airlines

Hong Kong Airlines is also owned by HNA Group. This airline has been on the brink of liquidation for quite a while now. The airline received a last minute cash injection to stay in business, but still doesn’t have a long term plan.

I’d imagine a government takeover of HNA Group could spell the end of Hong Kong Airlines as well…

Hong Kong Airlines A350

Bottom line

While nothing is official as of now, there are reliable sources that suggest an announcement of a government takeover of HNA Group is imminent. We’ll have to see what that means for Hainan Airlines, though I have to imagine it’s not good.

Hainan Airlines ceasing to exist would be a real shame for consumers (and also another loss for Alaska Mileage Plan miles).

(Tip of the hat to @kiraasuka)

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  1. augustine Guest

    The best Chinese airline by far especially her long haul business class.
    If not affected by the problems from her parent company, she would be one of the top five airlines in the world.

  2. Kim Guest

    IMO, HNA is expecting so much for a default, but since it has lots of assets, creditors will take over important and valuable assets. So the best way is to put a state-owned stamp on it first, then go default. Since later the owner is the government (mother of all gangsters), then the default will be an easy grab for the Chinese government. Just look at the default of Tewoo and Qinghai, now coming soon...

    IMO, HNA is expecting so much for a default, but since it has lots of assets, creditors will take over important and valuable assets. So the best way is to put a state-owned stamp on it first, then go default. Since later the owner is the government (mother of all gangsters), then the default will be an easy grab for the Chinese government. Just look at the default of Tewoo and Qinghai, now coming soon : Peking Founder. The Chinese government has invented a new way of default that maximize their profit. Now every company in China, corporate or SOE, is inspired of this new invention. The wicked default that swallows 60-70% of creditors money and then the companies still can do business as usual, is so in-line with China's development plan, which is to make money while not adding polution, and open up the market for foreigners to "donate" to China's development.

  3. Dominic Yeo Guest

    Back then I spoke with a Singapore Airlines media liaison who cryptically said Cathay Pacific might possibly be rebranded into Virgin Pacific and under new management (implied to be under SIA group - China Eastern). This scenario sees HK Express being given to Peach, and the carcass of HX to be a VSCOOT or something.

  4. Dominic Yeo Guest

    Oh no. I didn't like this plan when I heard about it back when I was working with SIN airport.

    Essentially, this scenario sets up China's big 3 for a multi-brand airline group.

    Air China group: Grand China (the 5 star carrier for boutique airline ops), AIr China (main brand), China AIrAsia

    China Eastern group (could be renamed Eastern Air Lines or China Airlines, this airline is intended as a mashup between Singapore Airlines...

    Oh no. I didn't like this plan when I heard about it back when I was working with SIN airport.

    Essentially, this scenario sets up China's big 3 for a multi-brand airline group.

    Air China group: Grand China (the 5 star carrier for boutique airline ops), AIr China (main brand), China AIrAsia

    China Eastern group (could be renamed Eastern Air Lines or China Airlines, this airline is intended as a mashup between Singapore Airlines and Delta): Eastern Air Lines and ShanghaiAir, Jetstar China or Zipair Shanghai (red, instead of green), and Eastern Connectiion,

    China Airlines group: China Southern Airlines taking on China Airlines livery (this will be the AA of China). CZ basically absorbs whatever will be left of the dying CX who has just launched under the new brand name Starlux.

  5. Noah Bowie Guest

    Hong Kong airlines will probably sold to Cathay Pacific making them by far the most dominant airline in Hong Kong. Bordering on BA levels of monopoly

  6. Brian Guest

    What are the impact on customers who are booked on flights in the future?

  7. kyall Guest

    Been following this blog for years and years plus other airline/aviation/points/miles news.

    I am shocked by how many airlines since say Air Berlin that have either been bailed out, propped up, liquidated or been taken over.
    It goes to show really how much political, geo-political, commodities and economics affect airlines as much what normal business and competition does.

    Fuel prices, oil prices, diplomatic spats, weather, viruses, disease, protests, Dr Dao Style incidents.. so many...

    Been following this blog for years and years plus other airline/aviation/points/miles news.

    I am shocked by how many airlines since say Air Berlin that have either been bailed out, propped up, liquidated or been taken over.
    It goes to show really how much political, geo-political, commodities and economics affect airlines as much what normal business and competition does.

    Fuel prices, oil prices, diplomatic spats, weather, viruses, disease, protests, Dr Dao Style incidents.. so many things can damage airlines so quickly it is a volatile industry

  8. Tim Gold

    @Nick
    AS has stake in China Southern.

  9. Nick New Member

    The public owned airlines of PRC have baffled me over years; the Big Chinese Three are part of the civil aviation division of CAAC, in return an arm/umbrella of the Communist Chinese government. Why do they need so many different brands, when they are essentially nationalized airlines and part of an entity/department/organization under the Government. The government could just let Hainan Airlines fail and the Chinese Three will make up for the slack

    To operate...

    The public owned airlines of PRC have baffled me over years; the Big Chinese Three are part of the civil aviation division of CAAC, in return an arm/umbrella of the Communist Chinese government. Why do they need so many different brands, when they are essentially nationalized airlines and part of an entity/department/organization under the Government. The government could just let Hainan Airlines fail and the Chinese Three will make up for the slack

    To operate essentially one entity under three different umbrella's seems absurd to me, and a waste of capital resources, considering how the different airlines don't have any synergy between them...
    The only difference I see is that China Eastern(or could be southern) with a minority stake by AA, and Air China's stake CX(but too offset that I think the Swire Group or a Swire Proxy has reciprocal equity in Air China.

  10. Beavis New Member

    Glad I had my Hainan flights post to my Alaska account!

  11. Janet Member

    @Eskimo - most flights in and out of China have been cancelled, so I wouldn't use that as a benchmark. There is already a lot of reporting that the Chinese air industry is in deep trouble because of Covid-19 and there will be a government bailout including potential mergers. It makes most sense for Air China to buy Hainan - fits with their strategy of owning CX to learn more about how to upgrade their...

    @Eskimo - most flights in and out of China have been cancelled, so I wouldn't use that as a benchmark. There is already a lot of reporting that the Chinese air industry is in deep trouble because of Covid-19 and there will be a government bailout including potential mergers. It makes most sense for Air China to buy Hainan - fits with their strategy of owning CX to learn more about how to upgrade their service. Overall airlines in China are still sub-par to others in Asia, especially on domestic flights, but there has been a solid improvement in the past decade.

  12. Dan Guest

    CA will likely become 'accidental' owners in HNA's stakes in HX and VA.

    HNA will likely want to liquidate HX asap (as they own part of CX) by returning the leased planes and perhaps absorbing what's left of their owned fleet into CX, as well as sell off the VA stake asap.

  13. StevenE Member

    No matter who the airline is - it’s always concerning when money is a problem - everyone gets nervous and wonders whether safety is compromised

  14. Lukas Member

    I wouldnt mind if they merged with Air China, since I prefer to stick with Star Alliance and I actually think that Air China’s long-haul business class is pretty good.

  15. Eskimo Guest

    @Leo

    ROFL, this is a Chinese thing.
    Replace few words and you get

    Virus will never die, do you think that those Wuhan government High Officials’ record would look good if a province population died under their hands? They will just bury the whistleblower in fake news somehow.

  16. Leo Diamond

    HU will never die, do you think that those Hainan government High Officials' record would look good if a province major business died under their hands? They will just buy my stocks in the company somehow.

  17. David Diamond

    @Sir Fly a Lot
    As opposed to the amazing service US airlines have, since they’re THE world power right?

  18. Low Key Guy Guest

    @Sir Fly a Lot

    why mention country while this post is about airline? All I know is that big 3 in China and big 3 in US are below or on average. With protection of routes, airlines services are not consistent. They did not face enough competition in their hubs. They don't give a s&#t to passengers. They reduce cost of meal, and provide low quality food. Not enough training for FA.

    I will miss HU's cheap cash price for biz class and easy AS points.

  19. BrewerSEA Gold

    It would be disappointing to permanently lose Hainan's Beijing and Shanghai in Seattle, as they must put some downward pressure on fares to Asia on the better carriers. I am so delighted to have JAL, Cathay, and Singapore as options now. I've only flown JAL so far though, as business award seats are few and far between on the other two flights.

  20. Sir Fly a Lot Guest

    @Chris

    Quality of service should exist in all cabins, not just up front.

    Japanese/Taiwanese/Korean/Singapore carriers all provide excellent service and food in all cabins. Hainan was the only Chinese carrier that has consistently done that.

    If China wants to be a world power, it needs to improve its service industry as a whole. Chinese flight attendants' main objective is to use their job to attract social media following, not serve their customers.

  21. Zhang Guest

    As the only Mainland Chinese airline with a decent hard product, a half-decent soft product and a passable FFP, HU will be sorely missed by many including me.

    However HU's demise is a long time in the making as it got dragged begrudgingly into domestic politics. Way back in 2018, its co-chairman Wang Jian (who died July that year by "accidently" falling off a 50-ft tall wall in southern France while having his photo taken)...

    As the only Mainland Chinese airline with a decent hard product, a half-decent soft product and a passable FFP, HU will be sorely missed by many including me.

    However HU's demise is a long time in the making as it got dragged begrudgingly into domestic politics. Way back in 2018, its co-chairman Wang Jian (who died July that year by "accidently" falling off a 50-ft tall wall in southern France while having his photo taken) said that a small "reactionary" group from domestic and foreign sources was deliberately sabotaging HNA Group and Chairman Xi. Bloomberg has an article here for anyone who's interested: https://www.bloomberg.com/news/articles/2018-02-07/hna-is-victim-of-conspiracy-against-china-co-chairman-claims

    Right now it kinda looks like the "reactionary" group have had their way with HNA. But, as always, we will never know what happened.

  22. Daiko Guest

    I want to make it clear based solely on my personal opinion. I've flew Air China long hual business class, China southern long hual business class, Hainan airline long haul business class and China eastern domestic business class. I also watched some YouTube reviews on MU long hual. All the service is on par with Europe airlines like Lufthansa except Air China. They are better than *A; DL is a close call.
    Unfortunately I...

    I want to make it clear based solely on my personal opinion. I've flew Air China long hual business class, China southern long hual business class, Hainan airline long haul business class and China eastern domestic business class. I also watched some YouTube reviews on MU long hual. All the service is on par with Europe airlines like Lufthansa except Air China. They are better than *A; DL is a close call.
    Unfortunately I saw CA deteriorate over the years on the service level. First flew long haul with them in Y abt 15 years ago. Service was pretty good. FAs paid attention to u and food was waaaaay better than US airlines. The day has gone.
    Couple downs: J wine list is a shame on Chinese airlines. Pax are higher chance to be rude.
    One up: larger seat pitch comparing with US airlines.

  23. JB Guest

    And you never got to fly their new 787-9 Business Class.....

  24. beyounged Guest

    @chris
    You are in the wrooooong place then. Here it is all about QoS for the chunk of folks seemingly way more than 1%.

    But HU folding would be very bad news for everyone. They run unique routes, provide pressure on CA, MU and CZ on a lot of markets, and has good service throughout the fleet. HX also is the last man standing in HKG against a CX monopoly. What they should do...

    @chris
    You are in the wrooooong place then. Here it is all about QoS for the chunk of folks seemingly way more than 1%.

    But HU folding would be very bad news for everyone. They run unique routes, provide pressure on CA, MU and CZ on a lot of markets, and has good service throughout the fleet. HX also is the last man standing in HKG against a CX monopoly. What they should do is to fold a few smaller government airlines into HU and make them a real contender to the big 3.

  25. Eskimo Guest

    News confirmed.

    Almost every HU flight out of PEK got cancelled.

  26. VT-CIE Guest

    @Creditian: Highly unlikely, as CX had acquired UO (HK Express) already. HX is the only competitor to the CX group, as 3K (Jetstar Asia) is the only competitor to the SQ group in Singapore.

  27. chris Guest

    I hope they keep all the routes if take over does happen. There are some nice non-stops from LAX I would happily use.

    Service is 1%er's problem, most people fly coach, Chinese, US, EU, African, we don't care about "QoS" as much as fancy flyers tend to. Just get me from A to B, I'm fine with whatever meal they offers.

  28. Creditian Guest

    HX might be folded into CX since CA is a major stakeholder of CX.

  29. Jiawei Guest

    @Norman WOAH I gotta go look up news on the death of its chairman. I’ve never known that.

  30. Sir Fly a Lot Guest

    RIP to the only decent Chinese soft product…

  31. VT-CIE Guest

    If there are two things I have noticed with Mainland Chinese airlines in the past decade, they are these:

    1. A Chinese aircraft never crashes. (With more than a handful of fatalities, that is.)

    2. A Chinese airline never dies. Au contraire: airlines in China keep springing up every year.

    I hope I am not proved wrong.

  32. Aaron Diamond

    " your typical ignorant stereotypical judgement…"

    I think he was referring to the fact that if the Chinese government wanted a merger/take over to happen, it would happen. And who could stop them?

    No need to have your default setting be knee-jerk defensiveness...

  33. Norman Member

    "as if there are real regulations"
    lol
    your typical ignorant stereotypical judgement...
    A system that is able to transport one of the largest number of passengers safely years and years over has got to be regulation heavy. Simple as that. Any deviation from a safe culture either culturally or regulatory-wise and you would see something happening when it repeats.
    Same goes for how you get one of the biggest economy to...

    "as if there are real regulations"
    lol
    your typical ignorant stereotypical judgement...
    A system that is able to transport one of the largest number of passengers safely years and years over has got to be regulation heavy. Simple as that. Any deviation from a safe culture either culturally or regulatory-wise and you would see something happening when it repeats.
    Same goes for how you get one of the biggest economy to work.
    But sometimes people just refuse to see that to maybe keep their supremacy?

    Hainan situation is unfortunate. I think it went downhill since the tragic death of its chairman in France a few years ago

  34. ghostrider5408 Guest

    The Chinese government announced a number of measures to jump start their economy one of which pertain to mergers, assisting both regulatory ( as if there are real regulations) and financial, making your post spot on. I do think the fact the government is open to and assisting mergers will open the door to an abundance of mergers.

    My daughter in law is Chinese he once told me she would never fly China Southern for various reasons any thoughts there Lucky?

  35. Brian Guest

    Communists-run airlines have been renowned for poor service, even in business class as I personally painfully experienced. I wonder if Hainan would deteriorate to become just another Shanghai airlines.

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augustine Guest

The best Chinese airline by far especially her long haul business class. If not affected by the problems from her parent company, she would be one of the top five airlines in the world.

0
Kim Guest

IMO, HNA is expecting so much for a default, but since it has lots of assets, creditors will take over important and valuable assets. So the best way is to put a state-owned stamp on it first, then go default. Since later the owner is the government (mother of all gangsters), then the default will be an easy grab for the Chinese government. Just look at the default of Tewoo and Qinghai, now coming soon : Peking Founder. The Chinese government has invented a new way of default that maximize their profit. Now every company in China, corporate or SOE, is inspired of this new invention. The wicked default that swallows 60-70% of creditors money and then the companies still can do business as usual, is so in-line with China's development plan, which is to make money while not adding polution, and open up the market for foreigners to "donate" to China's development.

0
Dominic Yeo Guest

Back then I spoke with a Singapore Airlines media liaison who cryptically said Cathay Pacific might possibly be rebranded into Virgin Pacific and under new management (implied to be under SIA group - China Eastern). This scenario sees HK Express being given to Peach, and the carcass of HX to be a VSCOOT or something.

0
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