Tag: conglomerate

HNA Group Rises After Company Asks Chinese Government for Help

March 1, 2020 / WIL BALDWIN

BEIJING/SHANGHAI, March 2 (Reuters) – Shares in HNA Group-controlled companies rose on Monday after the Chinese aviation and tourism conglomerate said it had asked the government to help it resolve liquidity risk caused by the coronavirus outbreak which has put heavy pressure on the airline industry.

HNA directly owns or holds stakes in a number of local Chinese carriers, which have suffered in recent weeks from widespread flight cancellations and plummeting demand.

Hainan Airlines Holding Co Ltd, the flagship of HNA Group Co Ltd, rose by over 3% by 0400 GMT, while HNA Technology Investments Holdings Ltd surged nearly 40%.

Other units such as HNA Investment Group Co Ltd and HNA Technology Co Ltd also saw their prices climb.

HNA Group said on Saturday it had asked the Hainan provincial government to lead a working group as it was not able to deal with the liquidity risk itself.

The group had acknowledged liquidity issues before the coronavirus outbreak started. In December, Chairman Chen Feng said HNA had faced cash flow shortage that forced it to delay salary payments.

Its Saturday announcement has driven heavy discussion in China on whether there will be a carving up of its assets.

Two weeks ago, HNA-related shares likewise rose on a media report that said China’s government planned to take over the debt-laden conglomerate.

“The implementation of a government acquisition would be challenging as HNA’s structure is complex,” Warut Promboon, head of credit research at Bondcritic, said on Monday. “Overall, it is credit positive. HNA has grown too fast and is too big that it needs to be broken down. The restructuring will be best under the state support.”

China’s HNA Steps Up Efforts to Sell Swissport at Big Discount

February 5, 2020 / WIL BALDWIN

LONDON/FRANKFURT, Feb 5 (Reuters) – China’s HNA Group is resuming efforts to find a buyer for airport luggage handler Swissport despite facing a loss of several hundred million dollars on its initial $2.8 billion investment, four sources familiar with the matter told Reuters.

The Chinese conglomerate has rekindled talks with several heavyweight investment funds as it needs to raise cash to cut its debts, the sources said.

Rothschild is helping HNA identify prospective bidders, who are hoping to buy the Zurich-based business on the cheap after previous attempts to sell it stalled last year, the sources said, speaking on condition of anonymity because the process is not public.

U.S. buyout funds Apollo Global Management Inc and Cerberus as well as Canadian asset manager Brookfield have come forward to revisit a possible acquisition of Swissport, the sources said.

Two other U.S. investors – Bain Capital and Centerbridge Partners – are also looking to take part in a new auction, two of the sources said, adding interest from industry buyers had waned.

HNA is hoping to limit its losses and recoup at least $2.3 billion from the sale, one of the sources said.

But offers are expected to value Swissport at about $2 billion, two of the sources said, with one adding Apollo had previously offered $2.1 billion.

This means HNA may need to swallow a loss of more than $500 million to offload the business, which has annual core earnings of about $270 million, they said.

HNA, Apollo, Cerberus, Brookfield and Bain declined to comment, while Centerbridge was not available.

HNA bought Swissport for 2.7 billion Swiss francs ($2.8 billion) in 2016 in a deal that was meant to complement its sprawling portfolio of investments in aviation, logistics and tourism.

But the Chinese giant had to look into cashing out at the start of 2018 when its liquidity challenges turned it into one of China’s most indebted companies and forced it to quickly sell assets.

The 20-year old company, led by chairman Chen Feng, came under pressure after embarking on an aggressive M&A spree in the United States and Europe with deals worth an overall $50 billion.

It made a push into the travel and tourism industry, buying a 25% stake in Hilton Worldwide Holdings Inc in 2016 and then branched out into financial services, becoming the leading investor in Deutsche Bank.

But its M&A binge resulted in cash flow problems, prompting a review of all its business interests overseas.

HNA initially considered a possible listing of Swissport on the Swiss SIX Exchange in 2018, but then opted for an outright sale.

Apollo and Cerberus, which bought Paris-based Worldwide Flight Services (WFS) in 2018, were both initial contenders for Swissport, but negotiations stalled after the Swiss company secured a refinancing package in August.

($1 = 0.9727 Swiss francs)

(Reporting By Pamela Barbaglia and Clara Denina in London and Arno Schuetze in Frankfurt; Editing by Mark Potter)

India Renews Plan to Sell Off Air India

January 27, 2020 / WIL BALDWIN

The Indian government is in the market to sell its stake of Air India – and on Monday set a March 17 deadline for initial expressions of interest.

Indian conglomerate Hinduja Group and US-based fund Interups are already reported to be submitting theirs.

It’s not the first attempt at a sale: in 2018 the government failed to divest 76 per cent of the airline, and with it over five billion dollars of debt.

Air India workers protested ….

And potential bidders opted out because of stringent conditions attached – such as retaining all employees.

This time, the government has indicated, it’s open to revising some provisions.

Though bidders must assume liabilities, including debt at just under 3.3 billion dollars.

And substantial ownership and control must remain with an Indian entity.

The sale might face opposition from within prime minister Narendra Modi’s ruling BJP Party – one lawmaker describes the deal as quote ‘anti-national’.

But if successful, the buyer gets over 7,000 landing slots in India and overseas …

Together with the carrier’s low-cost arm and a stake in its cargo and ground-handling operations.

As for staff, Air India currently has around 13,000 permanent and contract personnel on its books …

Including 1,850 pilots.

China’s Cash-Strapped HNA Secures Restructuring Deal

December 3, 2019 / WIL BALDWIN

HONG KONG, Dec 2 (Reuters) – Cash-strapped Chinese conglomerate HNA Group said on Monday it has agreed a deal to restructure its low-cost carrier West Air with a Chongqing-based asset management firm.

Chongqing Yufu Asset Management Group and its affiliates will together hold at least 70% stake in West Air, becoming the biggest shareholder, HNA said in a statement.

West Air, established in 2007, operates about 160 domestic and international routes with a fleet of 35 airplanes.

It has been directly controlled by HNA, whose affiliates also own struggling Hong Kong Airlines as well as Hainan Airlines Holding Co Ltd.

Budget carrier Hong Kong Airlines was ordered by Hong Kong’s air transport regulator on Monday to shore up its financial position by Dec. 7 or risk the suspension or loss of its licence.

Hainan Airlines, which has seen declining profits, said in a Shanghai stock exchange filing on Monday that it will seek 4 billion yuan ($568 million) in loans from eight banks led by China Development Bank.

The funds will be used to cover the costs of fuel, maintenance charges, staff salaries and operational expenses, it said in the filing.

$1 = 7.0389 Chinese yuan renminbi

Reporting by Meg Shen; Editing by Edmund Blair and Susan Fenton

Cathay Pacific Cuts 2020 Capacity Plan as Hong Kong Unrest Continues

November 30, 2019 / WIL BALDWIN

SYDNEY (Reuters) – Hong Kong carrier Cathay Pacific Airways Ltd <CPCAY> plans to cut passenger flight capacity by 1.4% next year, reversing an earlier plan for a boost of 3.1% because of a challenging business outlook, an internal memo reviewed by Reuters showed.

The capacity reduction follows Cathay Pacific cutting its second-half profit guidance earlier this month, the second cutback in less than a month, because of anti-government protests that began in Hong Kong in June that have discouraged travel to the city.

“Given the immediate commercial challenges and the fact that our position has deteriorated in recent weeks, we must take swift action to adjust our budget operating plan for 2020 downwards again,” Chief Executive Augustus Tang said in the memo.

“Put another way, rather than growing our airlines in 2020, for the first time in a long time, our airlines will reduce in size.”

Revenue performance continues to be disappointing and advance bookings into 2020 remain much lower than expected due to weak traffic from some of its key markets, particularly mainland China, the memo said.

A Cathay representative said the carrier had no comment.

Full-service carrier Hong Kong Airlines, backed by indebted Chinese conglomerate HNA, also said on Friday it would further reduce its capacity to mitigate the impact from the political unrest.

Several Asian airlines have also cut flights to Hong Kong, as the protests in the financial hub and an escalating China-U.S. trade war have pushed the Chinese-ruled territory into recession for the first time in a decade.

Hong Kong has enjoyed a week of relative calm since local elections on Sunday delivered an overwhelming victory to pro-democracy candidates.

But protesters stirred support for more rallies over the weekend, as police withdrew on Friday from a university campus where some of the worst clashes with security forces had occurred as part of nearly six months of unrest.

Shares in Cathay rose 0.8% on Friday, outperforming a 2% drop in the broader market.

(Reporting by Jamie Freed in Sydney; Writing by Miyoung Kim; Editing by Clarence Fernandez and Christian Schmollinger)

A passenger walks to the First Class counter of Cathay Pacific Airways at Hong Kong Airport in Hong Kong

Mitsubishi Heavy Industries has Skills to Build Airbus Wings

November 20, 2019 / WIL BALDWIN

NEW YORK (Reuters) – Mitsubishi Heavy Industries Ltd <MHVYF> is confident that it has the technical and production know-how to build high-tech wings for Airbus SE <EADSY> jetliners, the chief executive of the Japanese conglomerate said on Wednesday.

MHI developed sophisticated production processes at its facility in Nagoya in the process of building wings for the Boeing Co <BA> 787 Dreamliner, Chief Executive Seiji Izumisawa said in an interview.

“We have accumulated expertise in producing aerostructures as a tier 1 supplier, so if the opportunity does present itself we will certainly be willing to consider it,” he said.

It is not yet clear whether Airbus plans to outsource wings on future jets, such as its next-generation single-aisle aircraft, which could come out in about a decade.

Such future work would be important to MHI in part because of Boeing’s decision to bring wing production back in-house on its latest jet, the 777X.

“We do have the capability to produce some pretty complicated components,” said Izumisawa, who said he was involved in developing the 787 wings.

(Reporting by Alwyn Scott; Editing by Sonya Hepinstall)

FILE PHOTO: The logo of Mitsubishi Heavy Industries is seen at the company’s Sagamihara plant in Sagamihara, Japan

Vietnam’s VietJet Orders 20 Airbus A321XLR Aircraft

October 31, 2019 / WIL BALDWIN

Oct 31 (Reuters) – VietJet Aviation has ordered 20 Airbus long-range A321XLR aircraft that the budget carrier hopes will support its international expansion as Vietnam’s aviation market heats up.

VietJet expects the first aircraft to be delivered in 2023, it said in a statement on Thursday, adding that it will be the “first carrier in the world” to operate the new long-range version of the single-aisle A320neo family jets.

Industry sources said VietJet would be among the first to put the XLR into service.

Vietnam’s largest conglomerate in August applied to launch an airline next year, intensifying competition in one of the fastest-growing aviation markets.

The sector includes Vietnam Airlines, Jetstar Pacific Airlines and Vietnam Air Services Co.

The airline also signed a separate agreement in Toulouse, France, for two A320/A321 aircraft simulators.

VietJet’s order book for Airbus aircraft now totals 186, the airline said.

In September, Reuters reported that Airbus sold 15 A321XLR jets to VietJet.

Airbus on Thursday confirmed that VietJet had placed a new order for 15 XLR and said another 5 would be converted to the new jet from the A321neo model.

VietJet CEO Nguyen Thi Phuong Thao said Thursday’s order will “modernise VietJet’s fleet as we look to strongly grow our international flight network.”

The airline currently flies to destinations including Japan, Hong Kong, Singapore, China and India.

(Reporting by Nikhil Kurian Nainan in Bengaluru; Additional reporting by Tim Hepher; Editing by Jason Neely and Dan Grebler)

Rostec Ready for 737 MAX Out of Court Deal with Boeing

August 28, 2019 / WIL BALDWIN

MOSCOW (Reuters) – A unit of Russian conglomerate Rostec said on Tuesday it was ready for an out-of-court settlement with Boeing over its order for 35 Boeing 737 MAX jets, a spokesman for Rostec’s subsidiary Avia Capital Service told Reuters.

Boeing MAX 737 jets have been grounded worldwide and airlines are cancelling multimillion contracts following crashes in October and March that killed 346 people.

Earlier on Tuesday, Rostec said its unit had filed a lawsuit in the United States to cancel its order for the 35 MAX jets. The Financial Times, which first reported the move, said Avia Capital Service gave Boeing a cash deposit of $35 million.

A spokesman for Avia Capital Service told Reuters that delivery of the jets was first scheduled for October 2019 but was moved to March 2022. The Rostec unit had paid Boeing a deposit and was suffering losses from non-delivery, he said.

“If Boeing executives show a good will, we are ready to hold talks and find a mutually-beneficial out-of-court settlement for compensation of the losses we have suffered,” he said.

He added that the jets were ordered for a number of Russian air companies, including domestic low-cost firm Pobeda, a unit of the state carrier Aeroflot.

Russia is mainly using Boeing and Airbus jets for passenger flights, with a number of domestic airlines also adding Russian-made regional Sukhoi Superjet aircraft to their fleets.

The Rostec subsidiary now wants the deposit to be returned by Boeing with interest, along with $75 million in “lost profit” and about $115 million in compensatory damages, plus “several times the amount” in punitive damages, the FT said.

Rostec declined to provide further details about the lawsuit.

(Reporting by Gleb Stolyarov; writing by Anton Kolodyazhnyy and Tom Balmforth; Editing by Sherry Jacob-Phillips/Katya Golubkova and Emelia Sithole-Matarise)

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