Administrative Region of China, HNA Group also controls both Hong Kong Airlines and low-cost carrier HK Express, which provide direct competition to national entity Cathay Pacific Airways and its recently rebranded regional business Cathay Dragon (formerly Dragonair). This strong home network notwithstanding,

it is HNA Group’s international investments that are gaining industry attention. These, like its Chinese operations, have grown from modest roots. This started when a handful of excess Embraer ERJ-145s from the Tianjin Airlines fleet were transferred to Ghana in West Africa to help set up Africa World Airways in partnership with the China-Africa Development Fund earlier this decade. An investment in Turkish freight carrier

ACT Airlines in 2011 and its rebrand as myCargo highlighted HNA Group’s continued intention to grow, but it was the acquisition of a significant stake in French carrier Aigle Azur that clearly showed the ambitious development strategy of the business. This has given HNA Group a presence in Europe and expanded its reach in Africa. It is thought to have been part of a plan to gain licences to serve additional markets between China and France, although external factors are thought to have stopped this being achieved. More recently HNA Group acquired a

small stake in South African carrier Comair which operates scheduled flights under a British Airways franchise agreement across the country and parts of southern Africa as well as under the LCC brand Last November, HNA Group acquired a 23.7% stake in Brazilian carrier Azul Linas Aereas and through the partnership the companies will cooperate in the development of code sharing and new routes to support the growing passenger demand between China and Brazil. This deal has already seen HNA Group agree to take over delivery of two of three Airbus A350- 900s originally destined for Azul in 2018 as part of a five aircraft lease deal with AerCap. The Azul investment also saw HNA

Group acquire a small shareholding of the economic interests of European carrier TAP Portugal, a deal that was added to in mid-

HNA reportedly hired bankers to evaluate a possible shareholding in Monarch Airlines

July after it agreed to acquire additional convertible bonds, growing its stake to 23% through its involvement in the Atlantic Gateway private consortium that owns half of the carrier. Most recently, HNA Group agreed terms

on a $115 million equity placement in Virgin Australia, boosting its shareholding in the Virgin Australia Group to approximately 13%. It has a stated commitment to increase its shareholding to 19.99% as part of a strategic partnership that will likely see Virgin Australia and HNA Group airlines add new flights between Australia and China.

Focused strategy

John Strickland, director of JLS Consultancy, says although the HNA Group investments may appear a little random, there is a clear focus to its strategy as it proactively seeks growth opportunities outside its home Chinese market. “These can strengthen its home market

position as is the case with its investment in Virgin Australia where there are already significant volumes of Chinese tourists to Australia and it can gain additional domestic market access to Australia ,” he says. “Azul, for example, allows it to tap into the growing Latin American market which will play an increasing role in trade and tourism with China in the coming decades.” The model and investments in airlines

as geographically diverse as Azul, Virgin Australia and Comair along with the acquisitions of Gategroup and Swissport are almost a throwback to when major carriers owned smaller carriers and GDSs as well as

handling and catering companies. However, John Grant, director of JG Aviation Consultants, describes it as “a really shrewd strategic move by the group” creating a mix of horizontal and vertical alignments within the wider aviation sector. “Spreading corporate risk, reducing

reliance on the Chinese yuan by investing overseas and effectively placing a flag on each major continent reflects both the stature of the group and its commercial nous,” he adds.

Seeking investments What is next for HNA Group is unclear, but what is sure is it will be linked with any airline that is seeking new investment. The group reportedly hired bankers to evaluate a possible acquisition of a large minority shareholding in UK carrier Monarch Airlines earlier this year to potentially gain a stronger European foothold, while it was also said to be interested in the sale of Virgin America. In fact in the last month senior HNA Group officials held in-depth discussions about a potential future cooperation with African low-cost carrier fastjet. HNA’s chairman, Chen Feng, is among

a new breed of Chinese tycoons keen to construct global business empires. Analysts believe his strategy for the business is still in its infancy despite having already spent billions as part of a global takeover spree. His involvement in the aviation sector

began with his work for national regulator the Civil Aviation Administration of China (CAAC), but his airline experience began in the early 1990s. After a spell working for the World Bank he was recruited by the island’s local government to establish Hainan Airlines in 1993 with an initial fleet of just two aircraft, spawning what many analysts now see as one of the major future players in a globalised aviation sector. “I suspect the HNA Group story and its

HNA controls low-cost carrier HK Express


acquisition trail still has a long way to go as it seeks to both expand its footprint and diversify its risk across other markets and travel related sectors,” says Grant. A recent interview with Chen Feng would suggest that this will be exactly the case with the business looking to do more deals because he is confident about the


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48