An Air China 747-8i at San Francisco International Airport (Photo: AirlineGeeks | William Derrickson)

As Coronavirus Looms Large, Hong Kong Airlines Seeks Refuge in Potential Air China Deal

Looking for a lifeline in the sea of turmoil seems like a reach for cash strapped Hong Kong Airlines but talks are in the cards for the carrier to find a new home. According to the South China Morning Post, the airline is in talks with Air China for the national carrier to take over the private carrier and alleviate some of the pressure on HNA Group to find profitability. The airline also has other parties looking into acquiring the firm, but the names of these contenders have not come forward.

The airline’s largest shareholder is the embattled HNA Group, which is already facing an uphill battle to fight its own debt issues. The conglomerate’s firms are already looking for aid in the face of the parent company’s failure to reduce its ongoing debt while dealing with the fallout of the coronavirus in Asia.

The carrier already saw the sale as a way to gain a case and remove a problem child from its ownership, but the recent drop in demand could see HNA on the back foot of its negotiations.  

The airline had two individual deals going in 2019 with Citic Group and Wuxi Communications Industry Group. These deals were running smoothly until the asking price was considered. Both potential parties found the asking price by HNA Group to be far outside the realm of possibility and walked away from any potential deal leaving the airline still in the Hainan-based company’s control.

Should Hong Kong Airlines be sold, it would join the long list of acquired or startup projects that have ultimately failed at helping turn HNA Group into a superpower. The Chinese firm’s spending spree in the mid-2010s saw itself push itself into markets across the globe, including owning stakes or becoming the parent company of brands such as Deutsche Bank, Hainan Airlines, Sea Containers (SEACO) and Swissport.

But 2017 was a long time ago and the return on investment has not paid off for HNA Group. The logistics conglomerate has sold off parts of its empire to maintain profitability and now sees Hong Kong Airlines as the next piece to vanish from the HNA portfolio.

The airline has been part-owned by HNA since 2006, with heavy investment into international expansion occurring over the last decade. The airline has already divested itself of their other Hong Kong carrier HK Express, which was spun off to Cathay Pacific in Summer 2019.

Despite the desperation for a lifeline, this has not stopped the cuts and dangers of coronavirus as the airline has pushed forward a new policy to suspend as much cabin work as possible. According to the Japanese aviation site Traicy, the airline is not offering any onboard reading material outside of what is in the seatback pocket and removing food and beverage runs effective immediately.

This builds off of work that the Hong Kong-based carrier had done in mid-February to combat the virus and personal debt, which saw food and blankets removed from economy class and the carrier to slash 170 jobs.

Ian McMurtry
Ian McMurtry
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