A cluster of undelivered A330 jets can be seen parked at Airbus’ delivery center near Toulouse, France, where the European plane maker’s manufacturing facility is situated (and where the new A220 jet was revealed this week). Airbus faces a logjam of these undelivered aircraft, worth over $1 billion, for airlines affiliated to China’s debt-ridden HNA Group, following a deadlock over late payments. And the Chinese conglomerate is not the only one struggling here.

HNA’s financial woes

According to industry sources, subsidiary companies of the HNA Group have delayed payments for months and Airbus eventually decided to withdraw the deliveries. “After six months of talks, Airbus took the decision to withdraw the planes as it does not want to play the financier,” one source told Reuters on July 11, 2018. Airbus and HNA have not released any statement regarding the matter.

Other financial sources told the news agency earlier in 2018 that some HNA affiliated airlines were delaying aircraft lease payments to lessors. Some of the sources reportedly said that HNA’s flagship carrier, Hainan Airlines, and smaller ones, such as Lucky Air and Beijing Capital Airlines, had missed payments, while Tianjin Airlines was seeking to extend the term for payments due this year.

The debt that Hainan Airlines’ parent company HNA Group is dealing with, is estimated to be $94 billion. The group has initiated a bunch of asset sell-offs and IPOs to raise liquidity to manage its debts, according to the Chinese Jing Travel news site. But aside of aircraft payment delays and debts, the HNA Group has also fallen behind in its payments for…fuel. Back in March 2018, it was revealed that the group owed the state-owned China National Aviation Fuel Group $476 million in fuel bills.

HNA Group cleared Hainan Airlines’ fuel bill to China National Aviation Fuel Group (CNAF) of $475 million (3 billion yuan), Reuters reports. The conglomerate’s subsidiary has been amassing the bill since it started skipping its payments some 7 months ago, back in autumn of 2017, according to anonymous source.  

In some more somber news, last week, on July 3, 2018, HNA Group saw the death of chairman Wang Jian. Wang was regarded as the main agent behind HNA’s $50 billion acquisition spree that pushed the conglomerate into debt. Although HNA already named co-founder Chen Feng as sole chairman of the group, sources believe that Wang’s death will complicate the conglomerate’s efforts to restructure and pay off borrowings, Reuters reports.

Chinese banks and lenders are holding talks with some of HNA-affiliated airlines over their missing payments. The news support the rumors that the HNA Group conglomerate is facing liquidity issues at a time when its unclear ownership structure is attracting global attention and scrutiny.

Airbus’ financial burden

Holding the undelivered A330s is also costing millions for Airbus. According to one estimate, the daily cost of holding such an asset for the European plane maker, in terms of lost value, maintenance and storage costs, is at $10,000 per plane. Airbus may be holding six A330s for HNA Group-owned Hainan Airlines, Beijing Capital Airlines, and Tianjin Airlines, Jing Travel writes.

And Airbus is already hemorrhaging cash from the late deliveries of up to 100 A320neo single-aisle jets, an issue caused by other delays, this time of engine deliveries. However, as for the A320neo delivery logjam, Airbus was reported as saying by Reuters on July 6, 2018, that the number of undelivered planes was beginning to come down.

Coming back to the undelivered jets - the A330 Family aircraft are medium- to long-range wide-body twin-engine jetliners. According to Airbus commercial aircraft list prices 2018, the mid-size A330-200 jet is valued $238.5 million and the bigger A330-300 is worth $264.2 million. The six A330s could cost up to $1.6 billion at list prices.

Let us take a look at the aircraft that the aforementioned Hainan, Beijing Capital and Tianjin airlines have ordered from the European plane maker as of June 30, 2018, according to Airbus orders and deliveries book.

Hainan Airlines: 28 ordered and 28 delivered A319ceos, and the same amount of ordered and delivered A320ceos; also, three ordered, three delivered and nine operational A330-200s; as well as, 10 ordered, 10 delivered and 17 operational A330-300s. Altogether, the airline has 69 ordered, 69 delivered, and 69 operational Airbus jets.

Tianjin Airlines: 28 operational A320ceos, five operational A320neos, and one operational A321ceo; also, four ordered, four delivered, and four operational A330-200s. The total count: four ordered, four delivered, and 38 operational Airbus planes.

Beijing Capital Airlines: 20 A319ceos operational; four ordered, four delivered, and 33 operational A320ceos; 17 A321ceos operational; two ordered, two delivered, and seven operational A330-200s; as well as, two ordered, two delivered, and two operational A330-300s. In total, the airline has eight ordered, eight delivered and 79 operational Airbus aircraft.

About the Chinese Dragon

Hainan Airlines Group (HNA) is a large privately-owned airline group based in Hainan province, China. Hainan Airlines is part of Chinese conglomerate HNA Group, and together with its affiliates the Hainan Airlines Group operates an extensive network of domestic and international services from its main hub at Haikou Meilan International Airport (HAK) in Hainan province, according to Center for Aviation (CAPA) airline profiles.

HNA logo seen on a building in China (Image by MNXANL)

HNA Group has stakes and control in various Chinese and overseas airlines, including Hainan Airlines, HK Express, Brazilian Azul Airlines, Aigle Azur. The group is also known for its aggressive investment fueled by debt in overseas companies that include Deutsche Bank and Hilton Holdings. With $50 billion spent during the past two years, HNA Group is one of the four biggest Chinese spenders, according to South China Morning Post.