HNA Group buys into airline for access to French flight rights
30 Nov 2012
Week in China
20:20 vision, a minimum height of 6’2” and an ability to communicate in English is no longer enough. Pilot wannabes for China’s fourth largest carrier Hainan Airlines now have another major test to pass, after company officials were pictured sniffing potential hires during a recruitment event in Shanxi province.
The unorthodox approach isn’t just about personal hygiene, the airline claimed. “If they can keep their cool in this test, they aren’t going to sweat in the cockpit,” one of the recruiters told Shenzhen News.
The news might have raised a few eyebrows at French airline Aigle Azur, in which Hainan Airlines’ parent HNA Group recently purchased a 48% stake for $40 million – making it the first investment by a Chinese airline in a European carrier. Aigle Azur, France’s second-oldest airline, carried 1.8 million passengers last year on about 300 scheduled flights a week.
At first glance the deal looks like typically acquisitive behaviour from HNA Group, which already owns a range of airports, hotels and real estate, and holds stakes in a variety of airlines (WiC92).
In fact, the investment in Aigle Azur is HNA’s 13th in an airline subsidiary, Sina Finance has reported, although most of these have been in China itself. More recently, HNA has started to spread its wings, buying into a Turkish cargo carrier last year and investing in start-up Africa World Airlines from Ghana, which made its maiden flight in September. HNA is also being mentioned as a potential buyer for Qatar Airways’ stake in Cargolux, the Luxembourg-based freight airline.
By buying into Aigle Azur, HNA looks to be trying an alternative approach to breaking Air China’s stranglehold, by taking up the rights from the French side.
Coupled to the Ghana venture, the latest deal might look like a further push into African aviation, as Aigle Azur flies to a number of points in north Africa, mostly in Algeria.
But analysts say that the rationale can actually be found closer to home, and that HNA is motivated more by getting the rights to carry passengers between Beijing and Paris, a route currently operated by Air China and Air France.
Typically, China’s civil aviation regulator hasn’t allowed the leading Chinese airlines to compete against one another on international routes, although Air China has been granted a few exceptions out of Shanghai. It’s a policy that has led to complaints, with WiC also writing previously about China Southern’s frustration at not being permitted to operate its Airbus A380 fleet on international journeys (WiC168). In fact, it was reported in August that a deal was being brokered for the superjumbo to fly on the Beijing-Paris route, on tickets co-sold with Air China. Despite this, there is still no sign of the new flight being offered, although China Southern has finally managed to get the A380 flying cross-border, between its hub in Guangzhou and Los Angeles.
By buying into Aigle Azur, HNA looks to be trying an alternative approach to breaking Air China’s stranglehold, by taking up the rights from the French side. The Chinese media is reporting flights will begin next year, with long-haul aircraft leased to the French by HNA, probably Airbus A330s.
Other airlines in the HNA Group will also need to fly to more destinations themselves if it is to employ the ten A380s that it has on order. In fact, the company has suggested that weak market conditions may see it cancel some of its A380 purchases (which claimed an original list price of $3.8 billion, and was widely anticipated to be taken up by Hong Kong Airlines, another HNA Group investment).
“The A380 is such a big aircraft – in these years – 10 of them – who has such strength [to buy]?” the company chairman Chen Feng told reporters at the National Party Congress earlier this month.
Week in China
Week in China helps keep you up to date with the key business news from the world's fastest-growing large economy. It is produced on an exclusive and complimentary subscription basis for HSBC's corporate and institutional clients.