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APRIL 2018

Week 15


HNA signs MoU with Temasek and sells aviation and hotel assets to Hainan Airlines

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April 13th 2018

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China’s debt-ridden HNA Group conglomerate on Tuesday signed a Memorandum of Understanding (MoU) with Temasek, the Singaporean investment company, to explore opportunities in aviation, logistics and airport infrastructure. Read More »

The two parties stopped short of disclosing more details of the deal, but Temasek president and COO, Chia Song Hwee, said the MoU signalled “the interest of our two organizations to explore common business interests and pursue opportunities to work together”, particularly opportunities in aviation, international travel and related businesses. It reflected “the growing demands of higher incomes and a more interconnected world”, he said.

HNA CEO, Adam Tan, said HNA could “benefit from Temasek's investment expertise,” while Temasek could benefit from HNA’s experience in aviation and logistics, “not only in China but globally”.

Some in the industry have said they were surprised to see Temasek involved with HNA, given the Mainland conglomerate’s reputation for risk and its multi-billion dollar debt. Temasek's extensive global portfolio includes majority holdings in Singapore Airlines and the Singapore ports group, PSA.

Also on Tuesday, HNA announced its intention to sell major hotel and aviation assets to Hainan Airlines, the largest and most robust airline in the HNA stable of carriers. It is unclear how HNA plans to solve its issues this way. Simply reshuffling its debt and making it Hainan Airlines’ responsibility does not appear to be a sound long-term strategy.

Specifically, HNA announced it would sell “an overseas hotel operator” and an “important overseas listed subsidiary” to Hainan Airlines. HNA has significant holdings in the Radisson Hotel Group and NH Hotel Group; the latter is “an overseas hotel operator”.

Last week, the conglomerate announced its intention to sell the 26.1% it holds in Hilton Hotels. The conglomerate is Hilton’s largest shareholder after HNA Group invested US$6.5 billion in the hospitality company in 2016.

In the last 24 hours, the group also announced it had sold its 65.8% holding in aviation management services group, Hawker Pacific. General Dynamics Group subsidiary, Jet Aviation, reportedly paid US$250 for the acquisition.

In the interim, Hainan Airlines said it would acquire Chongqing-based low-cost carrier West Air, Air Guilin, HNA Hospitality Group, Hainan Sky Plumage Flight Training, as well as MRO providers HNA Technic and SR Technics from HNA and independent third parties.

Hainan Airlines said it would use a combination of cash and funds raised through the issuance of new shares to buy out its struggling parent.

There is increasing pressure on HNA to reassure investors of its financial soundness after it went on an estimated US$50 billion global investment spree in the last two years. The group also controls nine Chinese and two Hong Kong airlines: Hong Kong Airlines and HK Express in Hong Kong; as well as Hainan Airlines, Air Chang’an, Beijing Capital Airlines, Fuzhou Airlines, Guangxi Beibu Gulf Airlines, Lucky Air, Urumqi Air and West Air.

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