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.

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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.

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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.