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HNA trying to offload Airbus plane orders to leasing firms: sources

Beijing

HNA Group Co has been trying for months to offload passenger planes it ordered from Airbus SE, according to people familiar with the matter, as the indebted airline-turned-global acquirer wrestles with liquidity challenges.

The Chinese group asked the leasing arms of Industrial & Commercial Bank of China Ltd and China Minsheng Banking Corp, among others, to take over at least 10 of HNA's plane orders, the people said, asking not to be identified discussing a private matter.

Talks about the A330 jets, which are being delivered this year, date back to at least April, they said.

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Representatives for HNA and the leasing arm of ICBC didn't immediately respond to requests for comment. Minsheng wasn't immediately reachable. An Airbus spokesman declined to comment ahead of the company's results statement due this week.

Aircraft deals are notoriously difficult to exit as they carry significant penalties for customers looking to cancel orders, partly because of the disruption caused to the planemaker's production lines. The widebody A330 has a list price of as much as US$264 million, though airlines typically get significant discounts.

The jets would be part of one of China's biggest corporate garage sales ever - HNA has agreed to sell more than US$22 billion in assets this year, according to a Bloomberg tally - as the group trembles under the weight of more than US$77 billion in debt.

HNA's problems have exacerbated Airbus's own challenges. As the planemaker tries to meet a goal of delivering about 800 jets in 2018, it is grappling with delays related to narrowbody aircraft engines. Airbus has been hit by additional delays from Rolls-Royce Holdings Plc, which is said to have fallen 20 engines behind target for the new A330neo.

Airbus halted deliveries to some of HNA's subsidiary airlines in the first half of the year because of non-payment, a person familiar with the matter said in July. The planemaker has since handed over seven A330s to HNA as of the end of September, according to Airbus data compiled by Bloomberg.

The original A330 deal was signed during a visit by German Chancellor Angela Merkel in 2015 to China, where Airbus signed deals with Chinese carriers for 75 of the widebody planes.

Though HNA has been reversing a buying spree by selling everything from shares to buildings, its disposal of planes stands out because the group's core is aviation. But even that business hasn't been off limits as HNA agreed in August to divest a 30 per cent stake in its Avolon Holdings Ltd jet-leasing unit.

It is also said to be seeking to sell a fleet of ultra-luxury private jets, including its heavily kitted-out Dream Jet - a Boeing Co 787 that's available to rent from US$70,000 an hour. BLOOMBERG