China’s Hainan Airlines shores up cash pile

Hainan Airlines (HU, Haikou) has diverted funds raised to acquire aircraft in 2016 to instead “replenish the working capital” of the airline, it detailed in a Shanghai Stock Exchange filing on December 16. The carrier, part of cash-strapped HNA Group, raised CNY16.55 billion yuan (USD2.53 billion) in August 2016 through a private issue on the Shanghai exchange of more than 4.62 billion A-shares. Subtracting expenses and fees, the actual net amount of funds raised was CNY16.4 billion (USD2.51 billion). Exactly CNY11 billion (USD1.68 billion) of these funds was put towards the purchase of 37 aircraft, whose total cost was CNY43.1 billion (USD6.6 billion), while the rest was used for the acquisition of a 48.21% stake in Tianjin Airlines (GS, Tianjin). Hainan Airlines formally completed the acquisition of this stake in February 2017. However, as of December 15, 2020, CNY1.55 billion (USD237 million) remained unused from the aircraft purchases, including interest and financial income, and it is this sum that will now be permanently allocated to Hainan Airlines’ working capital. Specifically, the funds will be deployed “to reduce financial expenses, avoid invalid depreciation, and improve performance”, as well as to “avoid the idle and ineffective depreciation of resources due to over-introduction of aircraft”, and to improve cash flow. The move terminates the fundraising investment project, the disclosure said, and the company simultaneously announced the suspension of the introduction of new aircraft. According to the ch-aviation fleets advanced module, Hainan Airlines currently operates a fleet of 224 aircraft, namely nine A330-200s, twenty-four A330-300s, three A350-900s, eleven B737-8s, 139 B737-800s, ten B787-8s, and twenty-eight B787-9s. At least 186 of the total fleet are owned.