Temasek, others buying Hainan Airlines stake

Proceeds from the sale of Hainan Airlines shares will be used to fund plane purchases, aviation training, maintenance and airport business.
Proceeds from the sale of Hainan Airlines shares will be used to fund plane purchases, aviation training, maintenance and airport business.PHOTO: REUTERS

Sale of shares in HNA unit will raise up to $1.4b, as part of planned restructuring

BEIJING • Hainan Airlines plans to raise as much as 7 billion yuan (S$1.4 billion) by selling shares to investors, including an arm of Singapore investment firm Temasek Holdings, as part of a restructuring planned by the unit of Chinese conglomerate HNA Group.

The Haikou, Hainan-based carrier is selling up to 20 per cent of its Shanghai-listed shares to 10 investors, the company said in a statement last Saturday. Proceeds from the sale will be used to fund plane purchases, aviation training, maintenance and airport business.

The stake sale announcement follows two months after Temasek and the indebted HNA group said they were exploring partnerships in areas including aviation, logistics and airport infrastructure. Hainan Airlines' restructuring plans involve consolidation of HNA's various aviation assets under one umbrella, and the carrier has said it is looking to buy stakes worth 10.5 billion yuan in HNA subsidiaries engaged in related businesses.

A spokesman for Temasek declined to comment further on the filing by Hainan Airlines.

Hainan Airlines, started by one of HNA's founders, Mr Chen Feng, began operations in 1993 and counted billionaire George Soros among its early investors. Riding the economic boom in China and the surge in travel demand, the carrier now services about 1,800 domestic and international routes reaching over 220 cities worldwide with a fleet of more than 300 aircraft, according to its website.

Providing clarity on its ownership, Hainan Airlines said its controlling shareholder will change to HNA Group and parties acting in concert, from Grand China Air. The ultimate controlling party will change from the Hainan branch of State-Owned Assets Supervision and Administration Commission, or SASAC, to the Cihang Foundation.

Two charities - Hainan Cihang Charity Foundation and Hainan Province Cihang Foundation - own a majority stake in HNA. The conglomerate has been the subject of scrutiny worldwide by investors and regulators after piling up debt from a US$40 billion (S$53 billion) acquisition spree starting in 2016.

  • 1,800 Number of domestic and international routes that Hainan Airlines services - reaching over 220 cities worldwide - with a fleet of more than 300 aircraft.

Concerns over the group's finances have eased this year after a flurry of asset sales, including the US$6.5 billion stake sale in Hilton Worldwide Holdings, which helped many of HNA's bonds rebound from their record lows.

Shares of Hainan Airlines will remain suspended, the carrier said in a separate statement last Saturday.

The firm is one of seven HNA-listed units that have halted trading, locking about US$31 billion of combined market value, the largest swathe of frozen stock tied to a single business group in China. Though it is common for firms in China to suspend their shares citing reorganisations, they have a history of using trading halts to prevent their stocks from sliding.

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A version of this article appeared in the print edition of The Straits Times on June 12, 2018, with the headline 'Temasek, others buying Hainan Airlines stake'. Print Edition | Subscribe