Potential credit crisis in China would hurt aviation industry

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Introduction

Sept. 4, 2017, © Leeham Co.: China, now the world’s second largest economy, appears to be feeling the strains of its long, explosive growth.

The economy is slowing, there are concerns about capital outflow and increased debt by key companies.

HNA Group is one of China’s largest companies and a global investor. Indeed, it’s one of the largest in the world.

Its place in commercial aviation is known among those who are integral parts of the industry, but the depth of its reach may not be well understood.

Due to recent transactions, HNA now is owner of one of the largest aircraft leasing portfolios in the world, with nearly 600 aircraft. Another 253 airplanes are on order.

This includes the acquisition this year of CIT Aerospace, which added more than 300 aircraft to the Avolon portfolio.

Avolon was acquired by HNA in 2015.

However, HNA’s growth means debt, and according to several media reports, the Chinese government is now scrutinizing HNA under a general government “crackdown” on capital leaving the country.

Summary
  • Widespread investment in airlines and a few in lessors.
  • China’s cracking down on money leaving the country.
  • Leverage also concerns the government.

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