The lessors exposed to Hainan Airlines' financial woes - Flightglobal

In April HSBC contended that the Chinese airline market was ripe for another round of consolidation, nearly 20 years after it saw a massive shake-up.

The report states that it does not “rule out the possibility of further consolidation”, noting that the three largest Chinese carriers — Air China, China Southern Airlines and China Eastern Airlines — would likely lead any such effort.

The researchers also singled out the country’s fourth largest carrier, Hainan Airlines, as a target for consolidation thanks to its well-publicised financial woes.

Media reports earlier this year have also suggested that one, or more, of the three largest Chinese carriers might absorb Hainan’s operations. There has been no confirmation so far about such a move.

Hainan parent HNA Group also sought the help of the Hainan provincial government to turn its misfortunes around. A “joint working group” has been formed to help HNA with risk disposal, which has increased further due to the coronavirus outbreak.

Among the working group’s aims are “implementing dynamic management control” to whip finances back into shape, as well as creating operating policies to improve the competitiveness of group airlines. 

As for Hainan, it fell back into the red for its first-quarter financial results with the pandemic depressing travel demand. It saw traffic for the period fall dramatically, and also removed two aircraft in March.

Cirium fleets data indicates Hainan to have 232 aircraft in total, of which 161 are in operation, and the rest in storage. It also has 30 aircraft on order, comprising Boeing 737 Max 8s, Comac C919s, as well as one Airbus A330 and A350 respectively.

Hainan itself owns 92 of these aircraft, or about 40% of the fleet. These mainly comprise 737-800s and 787s.

The rest of the fleet are placed among 21 lessors. Based on indicative lease rates, Hainan’s montly lease payments amount