A global force

As Tan Xiangdong, president of HNA, put it: “HNA is working on expanding its business in the aviation sector and is investing in powerful companies globally. ” Plenty of others in China are expected to follow suit and China watchers haven’t missed the growing trend. As Sydney-based CAPA – Centre for Aviation put it in a September report: “It is surely a matter of time before Chinese airlines begin acquiring major foreign carriers. No other country has invested in as many foreign airlines as China has, but so far it is mostly in small operators, led by the HNA Group… China’s growing presence in foreign locations can often be seen as threatening, so, for this reason, China is interested in Etihad’s investment approach that, as China sees it, placates local markets (if still drawing ire of competing airlines). ” China’s big three – Air China, China Southern and China Eastern – haven’t yet dabbled in investments outside Greater China (Air China has investments in Air Macau and Cathay Pacific outside the mainland). CAPA notes that Delta Airlines’ investment in Shanghai-based China Eastern – paying US$450 million for a 3. 55 per cent stake, making it the first US carrier to own part of a Chinese airline – could indicate a warming to investments in the other direction as local carriers strive to improve their market access and gain foreign experience.

But the pundits are putting their money on the bulk of investment cash moving in the other direction as Chinese airlines and other interests rev up their efforts to become a dominant force in global aviation.

Foreign airlines aren’t the only target. China has already made huge inroads into the leasing business. Bohai Leasing, another HNA unit, is taking over Irish aircraft lessor Avolon Holdings in a deal valued at US$2. 6 billion, saying its ambition is to change the international aircraft leasing landscape by becoming the world’s third-largest player. It is not only the largest aviation deal from China by enterprise value, but also marks the first time a Chinese lessor has succeeded in taking over a Western one after a Chinese consortium’s failed attempt to buy the world’s largest lessor, ILFC, back in 2012.

“In the future, Chinese lessors will account for a larger share of the global leasing market … how we differ from other Chinese lessors is, firstly, specialisation, and secondly, internationalisation,” said Bohai’s chief operating officer Ren Weidong.

Another company, China Minsheng Investment (CMI) is currently in the process of taking an equity stake in European business aviation services group Luxaviation, which earlier this year acquired ExecuJet Aviation, a local firm that now operates more than 250 aircraft.

But HNA is leading the charge when it comes to foreign forays. It set up Africa World Airlines in Ghana with some other investors in 2012 and acquired a 48 per cent stake in Aigle Azur in France in 2012. It is also a shareholder in South Africa’s Comair and myCARGO Airlines in Turkey, as well as having acquired ground handler Swissport.

Chen Wenli, vice-president of HNA, recently declared: “HNA will become a total investor in the future and look for suitable targets for its various business units, such as aviation, tourism, logistics and finance. ” Buying a significant stake in Azul Brazilian (its chief executive is David Neeleman, who founded US low-cost carrier JetBlue) takes HNA into a new market.

China has been Brazil’s largest trading partner for years – bilateral trade was worth US$34. 24 billion in the first half of 2015 alone – but there are no direct flights from China to Brazil yet due to the long distance involved. There is, however, a huge traffic flow between China and Brazil, the vast majority of which transits through Europe or the US. A partnership between Hainan and Azul will allow them to link up and provide flyers with seamless connections through Europe and the US. HNA will now be the largest shareholder in Azul and have a seat on the board. The two airlines will cooperate on flights, new routes and frequent flyer plans in the future.

What is certain is that this latest cash splash outside China by Hainan won’t be its last…and more Chinese aviation interests will be following suit.

HNA is leading the charge when it comes to foreign forays.