New bid to wind up HNA as US$550b debt rocks airlines

Business | Agencies and Avery Chen 29 May 2020

Panama-registered China Joy Shipping filed its second winding-up petition against beleaguered HNA Group on Wednesday, another microcosm of the US$550 billion debt the global airline industry is facing amid the Covid-19 pandemic.

The court hearing is scheduled on August 26, according to the Hong Kong Judiciary's website.

China Joy Shipping withdrew its first petition against HNA Group in 2013 after the Chinese conglomerate repaid 90 percent of its debt and pledged to pay back the remaining US$400,000 (HK$3.12 million) in short term.

In February this year, the government of Hainan, the southern island province where HNA is based, took over management of HNA Group's liquidity risks after the coronavirus outbreak hit the travel industry and the indebted conglomerate's main source of income.

The move came after the group failed to resolve liquidity difficulties that stretch back to late 2017, it said.

HNA Group, whose debt is estimated to be at least 700 billion yuan (HK$758.63 billion), last month avoided a domestic bond default after a hastily arranged meeting to ask creditors to delay repayment of the bond.

Global airline debts are set to rise by more than a quarter to US$550 billion by the end of the year after governments announced US$123 billion in total support, the International Air Transport Association said earlier this week.

That includes US$67 billion of liabilities that must be repaid and US$11.5 billion in equity financing. On top of the US$123 billion from taxpayers, another US$52 billion comes from commercial sources such as bank loans.

Aviation companies around the world are slashing costs to preserve cash in the crisis, which has caused thousands of job cuts in the US airline industry with more to come. American Airlines said it must reduce its management and support staff by about 30 percent and may have to cut frontline employees as it downsizes due to the coronavirus outbreak, in a letter to employees made public on Wednesday.

Boeing, the largest American planemaker, meanwhile, said on Wednesday it was eliminating more than 12,000 US jobs, including 6,770 involuntary layoffs.

And in Britain, low-cost airline easyJet said it planned to cut up to 30 percent of its staff, or 4,500 jobs, and shrink its fleet, to fit the smaller market that will emerge from the coronavirus pandemic.

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