Chinese ground crew members check a Boeing 787 Dreamliner of Hainan Airlines, a subsidiary of HNA Group, after being refueled with biological aviation fuel that is produced from waste cooking oil, at Beijing Capital International Airport on November 21, 2017. Photo: IC

Shares of HNA's airlines and its related firms surged by the daily limit of 10 percent on Thursday's opening, after media reports emerged that China plans to take over the HNA Group and sell off its airline assets. 

Some speculate the reported move, amid the onslaught of the coronavirus, aims to contain the impact of the epidemic on the air carrier's financial ability. The epidemic has frozen China's airline market and forced carriers to cancel thousands of flights. 

Online market information surfaced on Wednesday revealing China's State-owned Assets Supervision and Admission Commission is about to take over the HNA Group. Media reports also claimed the government of South China's Hainan Province, where HNA is headquartered, is in talks to take control of the conglomerate. 

Some observers speculated the airline assets of HNA Group will be purchased by major Chinese carriers including Air China, China Southern Airlines and China Eastern Airlines. 

HNA had not responded to the Global Times' interview request as of press time. 

Lin Zhijie, an aviation industry insider, told the Global Times that Hainan Airlines' Thursday morning stock price surge was directly triggered by news of its government takeover amid the coronavirus outbreak.

"The public is very familiar with the HNA Group's problems: it is highly indebted, it made losses last year, and it operates scarce flights. And any external help that might lead to a turn in the company's business is considered encouraging news. A reportedly government takeover would undoubtedly be encouraging," Lin said.

According to Lin, Hainan Airlines' capital chain has been very tight. "A small external disturbance could throw the company into trouble. It's very likely that the company's finances became a problem in the past month, under the impact of the coronavirus."

He forecast that the coronavirus would also impact many domestic, small-scale airlines, which would collapse due to a halt in business.

In January, China's air transport market posted a negative growth due to impact from coronavirus. Around 50.6 million passenger trips were made that time, down 5.3 percent from the same period of last year, of which, passenger trips on domestic routes declined by 7 percent to 44.01 million.

Global Times