Issue no. 214 March 2016 HNA Group: creating a This issue includes mysterious global Page conglomerate China Dream 1 are few conglomerates in the world of aviaon born out Raonalising the of the establishment of an airline, and none seemingly with intra-European market 6 T such overwhelming ambion as the HNA Group. Chairman and founder,Chen Feng, has stated that “by 2020 we can become one of the Finnair: East by Northeast 10 world’s top 100 companies and by 2030 we want to become one of the top 50”. And yet it is privately owned; its ownership, financial data and LATAM: Impressive cost structure obscure and opaque. cung and fleet HNA Group grew out of Hainan Grand China Airlines was established restructuring 15 Airlines, now China’s fourth largest as a parent company for the listed airline. The airline, based in the his- Hainan Airlines and the group ac- torically piracal tropical island of quired control of a handful of smaller Hainan, was formed by Chen Feng carriers: Chang’an, Xinhua and Shanxi in 1993 in an unusual public/private Airlines. partnership with the regional gov- Now HNA Group is mulnaonal, ons (how it jusfies this claim is un- ernment of Hainan Province, later in a sprawling conglomerate with fin- clear); ownership of at least 8 air- 1995helpedbyasmallinial$25min- gers in many pies primarily relang to ports, 330 retail stores, 440 hotels, a vestment from George Soros’ Quan- transport and tourism, boasng rev- fleet of 40 ships of various types, a tum Fund apparently creang the enues of RMB190bn ($30bn) in 2015, shipbuilding yard, the world’s largest first sino-foreign “joint venture” air- assets of over RMB600bn and major container leasing operaon, and the line. The group itself was established or controlling stakes in 11 listed com- world’s fourth largest aircra leasing in 2000 — at the same me as as the panies. business. CNAC’s domesc industry reforms It lays claim to a fleet of over The group structure seems to be that created and promoted the top 820 aircra, carrying over 77m pas- set out under five main “pillars”: three holding companies of Air China, sengers on 700 routes involving 210 ( HNA Aviaon China Southern and China Eastern. domesc and internaonal desna- The aviaon segment is the core of the scheduled airline business based around Hainan Airlines and HNA GROUP: FIVE CORE PILLARS its domesc Chinese subsidiaries. As shown in the ownership chart of HNA Group Hainan Airlines on page 5 (extracted from a recent capital issuance filing) HNA Group only has a direct share- holding of less than 5% in the capital HNA Aviaon HNA Tourism HNA Logiscs HNA Holding HNA Capital of Hainan Airlines, and indirect inter- Commercial Airlines Airports Financial Services Charter Airlines Shipbuilding est of around 8% before eliminang Air Cargo Retail Container Leasing Travel Agents Marine Transport Maintenance Real Estate Aircra Leasing Hotels Commodity Trading cross-shareholdings but maintains Handling management control. It states that it operates and manages Hainan Airlines, Tianjin Published by Aviation Strategy Ltd Aviation Strategy Airlines, Deer Jet, Lucky Air, Beijing missed out to Ontario Teachers). Capital Airlines, West Air, Fuzhou As of the end of 2015 the com- ISSN 2041-4021 (Online) Airlines, Urumqi Air, Beibu Gulf pany states that HNA Real Estate This newsleer is published ten mes a year Airlines, Yangtze River Airlines, Guilin held investments in over 40 cies, by Aviaon Strategy Limited Jan/Feb and Jul/Aug usually appear as combined issues. Airlines, MyCargo (Turkey), Africa with 41 projects covering around Our editorial policy is to analyse and cover World Airlines (based in Ghana), 6 million m2 under construcon. It contemporary aviaon issues and airline and French based Aigle Azur (48% holds 20 property projects including strategies in a clear, original and objec- ve manner. Aviaon Strategy does not owned). It also has a 45% stake each office buildings, businesses, hotels, shy away from crical analysis, and takes a in Hong Kong Airlines and HK Express. and apartments, with an area of global perspecve — with balanced cover- In addion it has recently acquired a 867,000m2 and is currently devel- age of the European, American and Asian 2 markets. small 6% stake in the South African oping 10,000m Hainan’s CBD and regional carrier (and Brish Airways a 49,000m2 Pearl River man-made Publisher: franchise partner) Comair, plus a island. 24% stake in Azul in Brazil, a David HNA Retail claims ownership of Keith McMullan James Halstead Neeleman airline, which in turn is in brands like (quoted) Xi’an Minsheng the process of buying 40% of TAP Air department stores, Hunan Joindoor Editorial Team Portugal. supermarkets, Baoji Retailing, Shang- ( HNA Holdings hai Jiadeli supermarkets, Hainan Keith McMullan Seaview Internaonal Plaza, and [email protected] The “Holdings” pillar appears to in- corporate the group’s investments in nearly 330 outlets with operaonal James Halstead 2 [email protected] airports, retail and real estate. areas of over 1.2 million m . Under HNA Airports it claims ( HNA Capital Tel: +44(0)207-490-4453 ownership and operaon of eight HNA Capital is the Group’s financial Fax: +44(0)207-504-8298 airports in China, with maybe five sector arm. There is not a lot of in- others under “cooperaon projects”, formaon. The group states that “its Subscriptions: dealing in total with 35mppa. These main businesses are leasing, insur- [email protected] encompass Haikou Meilan, Sanya ance and trust etc. It has tradional Phoenix, Qionghai Bo’ao, (all three and innovave financial services such Copyright: on Hainan Island), Yichang Sanxia as securies, banking, futures, fund, (Hubei Province), Weifang Nanyuan investment banking, insurance and ©2016. All rights reserved (Shandong Province), Manzhouli Aviaon Strategy Ltd Xijiao (Inner Mongolia), Anqing Registered No: 8511732 (England) Tianzhushan (dual military/civil in HNA AIRPORTS Registered Office: 137-149 Goswell Rd Anhui Province), Tangshan Sannühe London EC1V 7ET (dual military/civil in Heibei Province) Manzhouli VAT No: GB 162 7100 38 and Songyuan Chaganhu Airport ISSN 2041-4021 (Online) (new build, Jilin Province, due to Songyuan Chaganhu open 2016). Haikou Meilan and The opinions expressed in this publicaon Sanya Phoenix are the two largest Tanshan Sannuhe donotnecessarilyreflecttheopinionsofthe airports on Hainan with passenger Weifang editors, publisher or contributors. Every ef- throughput of over 16mppa each, fort is made to ensure that the informaon contained in this publicaon is accurate, but while Qionghai Bo’ao is a new build Yichang Anqing Tianzhushan no legal reponsibility is accepted for any er- on Hainan island that opened in rors or omissions. The contents of this pub- March. licaon, either in whole or in part, may not The group is looking for invest- be copied, stored or reproduced in any for- Haikou mat, printed or electronic form, without the ment further afield and had been Qionghai Bo’ao Sanya Phoenix wrien consent of the publisher. short-listed for a bid to acquire London City airport with a £2bn price-tag. (They apparently narrowly 2 www.aviationstrategy.aero March 2016 wealth management etc, and has ob- it claims to be China’s top outbound ( HNA Logiscs tained licenses covering all financial tour operator, with more than 200 The “logiscs” pillar includes ship- industries.” retail stores. It also owns TransForex building (through Jinhai Heavy with In this core segment lies its invest- — China’s first non-financial instu- an annual build capacity of 6m dwt), ment in quoted Bohai Leasing in part- on that is qualified to provide indi- marine transport (with 50 ships nership with which, following the ac- vidual domesc and foreign currency “of different kinds”), along with quisions of SEACO and Cronos from exchange service and has 52 service cold-storage soluons and logis- GE, it has become the world’s largest outlets covering 23 cies. cs payment exhanges. Through container leasing company. subsidiary Tianjin Tanhai (formerly Under this pillar it also includes In 2010 the group acquired Aus- Tianjin Marine Shipping) the group “HNA Hospitality Group” which it tralian Allco, transferred its base of acquired in early 2016 Californian- states owns and manages over 450 operaonstoHongKongasanaircra based IT supply chain management hotels “at home and abroad” (in- lessor and changed its name to Hong company Ingram Micro for $6bn. cluding brands such as Tangla Hotels Kong Aviaon Capital (later partly re- ( and Resorts and NHA Hotels and HNA Ecological Technology versing it into Bohai). Resorts). In addion, perhaps within HNA appears to have created a sixth Following the acquision of this sector is included the group’s “pillar” to be posioned as the hold- Avolon in 2015 the group has 29% shareholding in Spanish hotel ing group for hi-tech businesses. We emerged as the world’s fourth largest group NH Hoteles. have no idea what this will entail ex- aircra leasing company. It obvi- cept that it may have something to do ously has further ambions and was In 2015 the Tourism group signed with “big data”. reputed at the and of 2015 to have a strategic alliance with Pierre & been in talks to acquire AWAS from Vacance-Center Parcs involving HNA Acquision trail Terra Firma for something over $2bn. Group taking a 10% stake in the HNA Group was proud last year to ( HNA Tourism French listed company and a promise be able to announce that it had got Under HNA Tourism the group owns of a $1bn investment in Center-Parcs into the Fortune Global 500 list of the tourist agency