Pontifications: Scrutiny of HNA intensifies

By Scott Hamilton

Nov. 27, 2017, © Leeham Co.: Time for some catch-up in the world of commercial aviation.

Scrutiny of HNA Group is intensifying as regulators in Switzerland claim the Chinese company provided false information in the takeover of a Swiss aerospace company.

Additionally, Airfinance Journal reports that at least five lessors have seen delayed lease payments from HNA Group airlines ”as HNA pumps cash from those carriers into other areas of the highly leveraged conglomerate.”

And HNA’s Hong Kong Express low-cost carrier has been barred from further expansion until it fixes problems identified by the Chinese government.

LNC reported in September that HNA was coming under credit pressure due to its high leverage.

In addition to a plethora of airline investments, HNA owns one of the world’s largest aircraft leasing companies, Avolon.

Airbus’ new sales chief?

According to Reuters, a Rolls-Royce executive, Eric Schulz, will be named to succeed John Leahy as the head of Airbus sales.

Christian Scherer, a former Airbus exec who was named CEO of ATR, in which Airbus holds a 50% stake, was thought to be the front-runner. But according to Reuters, the Airbus Board of Directors wants an outside in the wake of sales bribery scandals. Scherer was not implicated in any way in the scandals, and neither was Leahy, who is retiring after 33 years with the company.

Emirates First Class—Not

When I first saw this commercial, I thought it was for Emirates Airline first class. Not so.

Bombardier raises $1bn

Bombardier raised $1bn last week, intending to retire debt and to add cash to the balance sheet. The deal was $100m over-subscribed.

Eastern Airlines

Eastern Airlines, the resurrection of the original carrier, saw its operating certificate canceled by the US Department of Transportation.

Ten Boeing 737-8 and 20 Mitsubishi MRJ90 orders go with it. The MRJ orders, which included purchase rights for 20 more, were always a puzzle.

Boeing 787

If the commitment announced by Emirates Airline for 40 Boeing 787-10s is firmed up by the end of the year, this will be the first time since 2013 the book:bill will be 1:1.

Last year, the B:B was 0.42 and the year before 0.53.

19 Comments on “Pontifications: Scrutiny of HNA intensifies

  1. It is so funny that you refer to Gategroup as an aerospace company. They are a catering company or a flight kitchen. Real aerospace companies do something else than provide meals for the passengers.

  2. Yikes, it looks like HNA Group’s headed for a fall. It paid 9:00% for a $300MM one year bond at the beginning of this month. 9.00% for one year money! Googling “HNA Group” shows murky ownership issues and a Swiss government fraud investigation related to a Gategroup acquisition. Three real questions emerge: 1) how much Chinese and/or regional government support for it’s out there; 2) what are the Chinese bankruptcy reorganization laws like; what AB and BA orders are currently outstanding? Scott, thanks for this update. Anything further to add?

  3. Airbus: I think you have to wonder what is going on with Airbus when an outsider replaces the “iconic” Leahy rather than a protege.

    Companies don’t do that unless they have serious trouble.

    Ford probably being the major example (in taking a non Car exec in Mullaly)

    • Hire staff from another tainted company? At least they know how it all works. Interesting article “the bullshit castle” in Der Spiegal, if you haven’t already read it. This scandal is potentially vast, and the commissions paid so enormous that it is hard to believe that senior sales staff can have been unaware. If Airbus has been at it Boeing must have done it as well, or else their products are vastly superior.

      • I knew RR had issue structural and management wise.

        Are they in the same class as Airbus possible ones?

        • Ahh read it, a bit bandwidth limited so I have to watch how much I grab off the net.

          Rings bells on RR.

          Also seems to pin Enders in the middle of things.

          Certainly matches any US drama.

          • And with the bribes stopping so go the Aircraft orders?

            And where does Leahy fall in all this.

            Often int h US executives “retire” for their health or to spend more time with their families.

            It looks like the LM scandal over here.

          • @Transworld
            “Certainly matches any US drama.”

            Not quite, the US seems to have short memories.

            Remember the massive fraud concerning the ‘AAA securities/collateral debt backed by US rating agencies / banks that triggered the GFC .

            The world is still waiting for justice.

          • Wholly agreed it was vastly worse.

            I would not rate it as a commercial issue for one company, it would have been the USA government and agencies in collusion with the so called financial institutions in a case of all time greed.

            As for justice, there never is any nor can there be.

            The system is rigged, working people (if there are any left after the smoke subsides) carry the burden for bail out and take the hit.

          • This is big and is going to be difficult to contain, you can see regulators on both sides of the Atlantic rubbing their hands with glee. Looks like heads will roll. Is this the reason for the almost complete lack of sales at Airbus (TA at least

      • “If Airbus has been at it Boeing must have done it as well, or else their products are vastly superior.”

        Or maybe it explains Airbus lead in sales, numbers wise, the past many years.

        • It seemed there was a bias with some Airlines and that might be explained in part (granted not all)

  4. The Boeing 787 drop off made a lot of sense post 2013 as the positions were hard to come by sans some juggling and serious negotiations.

    Its been pretty amazing to see it do this well this soon.

    Fuel efficient buying frenzy is over due to oil prices, down market as they looked to have oversold (i.e. getting positions wh9ile the getting looked good)

    On the other hand, not a lot of cancellations or deferrals either.

    A most interesting market and dynamic and forecasts are only as good as the weather predictions.

    In short, if people could really predict markets before they happen they would be grossly rich.

    The laugh is that people keep giving other people money to do so.

  5. Most likely did the CIA follow they Aibus money and did not like some part of the money flow, there is a chance they told MI6 that some flows had to stop quickly but the British officials could not explain clearly enough to the French and Germans what the problem was and what would happen if they did nothing so CIA or similar US agency had to go thru the UK Serious Fraud Office to kick start it. Boeing probably does the same with “sales cost” but double checks with the CIA first to put restrictions on the distribution of the money flow.

    • The unhealthy results of one sided NSA snooping misused for commercial purposes. ( interesting to follow the fallout from the information “freed” by Snowdon and others.)

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