$10 Billion Embezzled From Bankrupt Airline Group

China’s HNA Group began with Hainan Airlines and then acquired brands like Radisson Hotels; airline caterer Gate Gourmet; 25% of Hilton; nearly 10% of Deutsche Bank; and 29% of NH Hotels. They acquired stakes in Red Lion Hotels; Virgin Australia; TAP Air Portugal: South Africa’s Comair; Azul Brazil and much more. The company’s corporate structure sometimes makes it difficult to discern what they own, what they’ve sold off, and what they’ve merely sold to themselves.

Before the pandemic they worked to reduce a debt load that exceeded $100 billion by selling off assets, but continued to face problems paying for fuel, problems paying employees, and problems paying investors. HNA even offered investors airline airline tickets in lieu of interest payments.

They even turned off inflight entertainment systems because they couldn’t pay licensing fees. Seven of their grounded planes were seized by Hong Kong airport over unpaid fees.

Still burdened by about $75 billion in debt they’re entering bankruptcy restructuring, or at least 500 of the 2300 companies they’re reported to own will be in bankruptcy. And it’s now come out that that $10 billion was embezzled from the company.

A total of 61.5 billion yuan ($9.57 billion) had been embezzled by shareholders and other related parties, Shanghai-listed Hainan Airlines Holding Co, HNA Infrastructure Investment Group Co and Shenzhen-listed CCOOP Group Co said late on Friday.

The identities of the shareholders were not disclosed in the statements.

The three companies and their subsidiaries had also provided non-compliant guarantees for 46.5 billion yuan in financing, according to the statements filed after creditors of their parent applied to a court for the conglomerate to be placed in bankruptcy and restructured.

Several aggressive companies using massive debt to acquire businesses abroad at inflated prices have collapsed, including Anbang Insurance which tried to buy Starwood hotels before Marriott emerged victorious. China’s belt and road initiative is faring poorly (expensive bad debt that’s turned out to be an inefficient means of buying influence). And even their much lauded vaccine diplomacy is sputtering with some vaccine candidates performing poorly in trials and others plagued with production challenges.

While China remains a formidable geopolitical foe, cracking down on liberties in Hong Kong and ratcheting up tensions with Taiwan, it’s also plagued with corruption and poor decision-making guided by political agendas and political connections. In other words, we tend to ascribe perfect strategy and competence to rivals when they’re at least as backward as we are.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. The communist party will make sure that folks at the head of HNA will be punished. Politicians in the US are just slot machines, put in enough money and you’ll win a “get out of jail” card. Here, nobody is punished for large finances crimes.

  2. Why is that every subject today almost always end up in biased political comments ?
    We’re here for the fun of travel, let’s live politics for CNN and FOX.

  3. China is full of financial schemes. Only time will tell when the next big one hits (like Luckin Coffee)

  4. @FabinhoBP probably because it helps draw more traffic 🙂 Everyone always has a political viewpoint they will want to express/defend/troll

  5. @FabinhoBP –

    +1. Let’s put the politics aside and go back to trolling each other over travel stuff again like in the good old days.

  6. Lai Xiaomin, was executed on Friday following his conviction on bribery former top China banker.
    Having lived in Asia-China for 20 years this is not a surprise. If you see the article he had cabinet upon cabinet of cash, much of it USD ? Almost $300 million in bribes.

    HNA, Anbang are not a surprise at all to me. They do business differently there. But they have extended their companies to exposure by buying into western companies.
    We used to compare doing business in China to the American Wild West, guns and manipulations gets the job done.

    It remains to be seen how China businesses investing in western companies will continue.
    China purports to be doing so well economically, yet they have failing companies.

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