HNA Group Photo: CFP

Hainan Airlines confirmed on Thursday that it has received a penalty from the China Securities Regulatory Commission (CSRC), saying that it was fined a total of 3 million yuan ($445,117) due to violations of information disclosure rules, and 11 senior executives, including the former chairman, were punished.

The airline was put under investigation by the CSRC in December over suspected violations of information disclosure rules, and it received the notice of administrative penalty from the regulator on Wednesday, the company said in filing to the Shanghai Stock Exchange on Thursday.

HNA Holding was once the flagship asset of HNA Group. HNA Group had previously failed to save itself over a two and a half year period and finally turned to the Hainan provincial government for help, after suddenly falling into a liquidity crisis in the summer of 2017, according to caixin.com on Thursday. 

On February 29, 2020, Hainan Province dispatched a joint working group to HNA Group to conduct a thorough investigation of its assets and found that HNA Group was substantially insolvent with the only viable option being bankruptcy and reorganization.

In September of 2020, HNA announced that it had brought in Liaoning Fangda Group Industrial Co as a strategic investor for Hainan Airlines. Liaoning Fangda injected 41 billion yuan to help the unit repay its debts, according to caixin.com. 

In return, Liaoning Fangda ended up with a 25-percent stake in Hainan Airlines, either directly or indirectly. In December of 2021, HNA Group officially handed over control of Hainan Airlines to Liaoning Fangda.

One week later, HNA Holding disclosed that the CSRC had filed a case against the company due to suspected violations of laws and regulations relating to information disclosure.

The penalty issued by CSRC claimed HNA Holdings lacked independent management and control of company funds. Its financial transactions with related parties and the signing of external guarantee contracts were all completed by the organization and under the control of HNA Group. As a result, HNA Holdings failed to disclose non-operating related transactions as required. 

Specifically, from 2018 to 2020, there were 2,849 instances of non-operating related transactions between HNA Holdings and HNA Group and other related companies, amounting to a total sum of 165.215 billion yuan; 197 related-party guarantees were not disclosed in a timely manner, with a total guarantee amount of 39.573 billion yuan. 

As of January 30, 2021, HNA Group illegally occupied 38.022 billion yuan of listed company funds and illegally guaranteed 27.657 billion yuan. 

The above matters were not disclosed in a timely manner as required, nor were they disclosed in the company's periodic report, which constituted a major omission, CSRC said.

HNA Holdings assets and liabilities are already in a precarious state, and capital injection is urgently needed, market watchers said. 

On July 14, 2022, HNA Holdings issued a performance forecast stating that due to factors such as repeated COVID-19 outbreaks and rising jet fuel prices, it is expected that the net loss attributable to shareholders of listed companies in the first half of 2022 would be between 11.95 billion and 12.96 billion yuan.

Global Times