Hainan Airlines sells two Boeing 737-800 planes for US$27.5 million to raise cash, after grounding 737 MAX 8
- Embattled Chinese aviation conglomerate HNA Group to sell two Boeing 737-800 planes
- Deal has more to do with the group’s stretched financial condition, little to do with the grounding of Boeing 737 Max 8, analyst said
Hainan Airlines Group can’t seem to catch a break.
China’s fourth-largest carrier, a unit of one of the country’s largest and most heavily indebted conglomerates, was in the midst of an asset disposal programme – selling everything from Hong Kong land parcels, slashing its Deutsche Bank stake to airliners – when a Boeing 737 MAX 8 operated by Ethiopian Airlines crashed this week.
The tragedy, which killed 157 people on board – including eight Chinese – sparked a worldwide backlash that saw aviation regulators around the world ordering every aircraft of that model to be grounded.
Hainan Airlines, based in Haikou, operates 11 of those Boeing 737 MAX 8 aircraft. With the Civil Aviation Administration of China (CAAC) being the first to order a stop in the aircraft’s flight, the carrier had to redeploy jets from its fleet of 235 planes to continue serving travellers.
On Thursday, Hainan Airlines announced an agreement to sell two Boeing 737-800 planes for US$27.5 million to NGF Genesis Limited to raise cash for its business needs, according to a statement to the Shanghai Stock Exchange.
The sale was “to optimise the structure of the fleet, improve the liability ratio, and make the company more nimble,” the filing said.
The 737-800 model, dubbed the Next Generation when it was launched in the 1990s, sports a bigger wing span from the original 737 family, the most popular aircraft model sold by Boeing. The 737 MAX 8, first delivered to a customer in 2017, is the latest version of the 737 family that crashed this week in Ethiopia and five months earlier in Indonesia.
“This deal has little to do with the grounding of the 737 MAX 8 as they are very different models,” said David Yu, adjunct professor of finance at New York University in Shanghai, who is also an aviation columnist. “737-800 type aircraft would be an ideal temporary replacement for the MAX 8 type. This move is more likely a part of the normal fleet planning process and might have been part of the overall plans to decrease overall debt load as they saw an opportunity to raise additional capital.”
Hainan Airlines operates aircraft made by both Boeing and Airbus, according to its website. Besides the 11 737 MAX 8 airliners that have been grounded, the fleet comprises 157 Boeing 737-800, 10 of the 787-8, 10 of the 787-9, two 737-700HH, four Airbus A350, 14 of the Airbus 330-300 and nine Airbus 330-200.
The net book value of the two planes, which entered service in 2000, was 133.6 million yuan (US$19.9 million) as at the end of October, according to the filing. NGF is an Ireland-registered company, set up last August, public information shows. HNA said it was not a related transaction.
HNA has been struggling to pay back its piling debts since last year. Since early last year, the group has been busy offloading assets from home to abroad, including worldwide properties and stake in Hilton Grand Vacations Inc and Deutsche Bank. It is also facing lawsuits and asset freezing by creditors from mainland to Hong Kong.