ATW Daily News

HNA, Grand China, SAL join rush for government aid

Wednesday December 24, 2008

HNA Group subsidiary Grand China Express Airlines is expected to receive a CNY200 million ($29.1 million) injection from the Tianjin municipal government following the signing of an agreement yesterday.

GCEA has been suffering from operating losses and struggling to survive since its March 2007 launch owing to the "immaturity of the Chinese regional market," spokesperson Cui Kai told ATWOnline.

Grand China is joining the growing trend of domestic airlines looking for handouts. China Southern Airlines and China Eastern Airlines each have been approved to get CNY3 billion from Beijing (ATWOnline, Dec. 11), while HNA and Shanghai Airlines have applied for a capital injection from the Hainan provincial government and Shanghai municipal government respectively

It has been speculated that HNA has requested CNY1.5 billion. SAL Chairman Zhou Chi told foreign media that the airline's third-quarter debt ratio was 91.4% but that its request is far below the CNY3 billion received by CZ and CEA.

Air China has requested that parent China National Aviation Holding Co. inject capital in order to reduce its 69% debt ratio, the lowest among China's big three carriers, but has not yet received a reply. In the meantime, CA plans to circulate medium-term notes worth CNY6 billion to "adjust the debt structure" and "increase flowing capital."

Chinese airlines have suffered declining demand over the past few months, but the market showed some recovery in November. Air China transported 2.9 million passengers last month, up 4.9% year-over-year, on an 8.3% rise in domestic-route boardings to 2.4 million. China Southern carried 4.6 million passengers on domestic routes, up 7.1%, but CEA reported a 0.8% decrease to 3.3 million. Load factors fell for all three--CA's was down 3 points to 75.6%, CEA's off 6.3 points to 69.7% and CZ's down 1.5 points to 74.9%.

HNA said it has cut some "unprofitable routes" and reduced salaries by 30%, but it still plans to spend CNY2.35 billion on the purchase of a 45% stake in Beijing Yanjing Hotel Co. and a 95% share of a firm with significant Beijing real estate holdings as it plots its expansion in the capital.

by Katie Cantle

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