HNA’s notorious credit problems could put a sudden stop to its core business of flying airplanes if the mainland conglomerate can’t come up with a way to pay off five months of overdue fuel bills in the next 10 days.
In a formal notice seen by Mingtiandi, South China Bluesky Aviation Oil, a subsidiary of China National Aviation Fuel Group, said it would stop supplying fuel to Hainan Airlines because the flagship HNA unit has missed payments since October 2017. State-owned China National Aviation Fuel Group has near-monopoly rights over jet fuel distribution on the mainland.
“Your company’s behaviour of missing fuel payments has severely affected our operations, and acutely threatens our fuel security,” the state-owned company says in the statement. The Guangzhou-based firm demands that Hainan Airlines Holding Co, pay all of the overdue bills by 4:00 PM on March 16th, and submit a written commitment not to delay future payments.
If the payments are not received, and the Hainan-based airline fails to meet its supplier’s demands, South China Bluesky says it will cease supplying fuel to the carrier on March 18.
HNA’s Fuel Bill Goes Stratospheric
Cash-strapped HNA Group has racked up an estimated RMB 3 billion ($476 million) bill with China National Aviation Fuel Group, according to a Reuters account last week. The conglomerate’s outstanding balance with the fuel company is said to have surged significantly over the last six months, according to the report citing oil industry sources. HNA has paid only a small amount of its bills during that period, as its overdue balance ballooned.
South China Bluesky made clear in the statement that it has actively approached the airline for payment via phone calls, personal visits, collection letters and lawyers’ letters. The fuel supplier also has filed a case against Hainan Airlines with the China International Economic and Trade Arbitration Commission, an arbitration institution.
Chaired by billionaire tycoon Chen Feng, HNA has controlling stakes in 13 carriers in Greater China including Shanghai-listed Hainan Airlines.
Flailing Conglomerate Ditches Assets To Raise Cash
HNA’s missed fuel payments are just the latest example of the group’s financial plight created by its $40 billion global acquisition spree over the past two years. In the last few months the former superbuyer has started selling assets to cut debts that are estimated at as much as $100 billion.
Just last week, an SEC filing revealed HNA’s apparent plans to sell its $1.4 billion stake in US hotel chain Park Hotels & Resorts Inc. Apart from equity stakes, HNA has also disposed of real estate assets in return for cash. Last month, HNA sold a pair of land parcels at Hong Kong’s former airport site Kai Tak to Henderson Land for HK$16 billion ($2 billion). Prior to that, the company sold 1 York Street, an office tower in downtown Sydney it had bought in 2011, to Blackstone Real Estate Partners (BREP) Asia fund for about A$200 million ($161 million).
The company was reported to be approaching investors to sell two office buildings that it had purchased on London’s Canary Wharf for around £366 million ($496 million). Meanwhile, in the US, HNA was reportedly marketing commercial properties in New York, Chicago, San Francisco and Minneapolis valued at a combined $4 billion.