BEIJING/SHANGHAI (Reuters) – China plans to take over HNA Group Co and sell off its airline assets, as the coronavirus outbreak has hit the Chinese conglomerate’s ability to meet financial obligations, Bloomberg reported here on Wednesday, citing people familiar with the matter.
The government of Hainan, the southern province where HNA is based, is in talks to take control of the conglomerate, the report said. HNA directly controls or holds stakes in a number of local carriers, including its flagship Hainan Airlines (600221.SS).
HNA did not immediately respond to requests for comment on the Bloomberg report.
HNA Group was once one of China’s most aggressive dealmaking firms, spending $50 billion to build an empire that once spread from Deutsche Bank (DBKGn.DE) to Hilton Worldwide (HLT.N).
It began unwinding those bets two years ago to shift the focus to its core airlines and tourism businesses, after drawing scrutiny from Beijing and other overseas regulators.
In December, its chairman Chen Feng said that the firm had faced cash flow shortages that forced it to delay some salary payments in 2019, but vowed to resolve its liquidity risks this year.
The company has in recent weeks come under pressure from the new coronavirus outbreak in China which has forced airlines to cancel thousands of flights.
Hainan Airlines and other airlines have tried to cut their losses by putting foreign pilots on unpaid leave, Reuters reported on Tuesday. Hong Kong Airlines, also part-owned by HNA, said on Friday that it will cut 400 jobs.
China’s aviation regulator acknowledged the industry’s pains last week, and said it would support restructurings or mergers to help airlines cope with the epidemic.
Reporting by Bhargav Acharya in Bengaluru and Brenda Goh in Shanghai; Editing by Vinay Dwivedi and Jane Merriman