Hainan Airlines in talks for CR Airways stake
By Lu Haoting (China Daily)
Updated: 2005-11-25 06:17

HNA Group, the parent of Hainan Airlines, is in talks to take a controlling stake in CR Airways, a Hong Kong regional carrier.

The move could mark the beginning of HNA's international expansion by taking control of an overseas airline.

"The deal is still under negotiation and we are waiting for the relative documents confirming approval of the move," Hu Jie, Hainan Airlines' executive vice-president, told China Daily yesterday.

CR Airways declined to comment on the talks.

A South China Morning Post report said HNA, the mainland's fourth largest aviation group in terms of sales, is trying to buy 60 per cent of CR Airways by swapping the shares of Xinhua Airlines Ltd, 60 per cent owned by HNA, though the details of this are currently unknown.

HNA Chairman Chen Feng was appointed chairman of CR Airways and the Hong Kong carrier's staff were informed about a new management team at a briefing held on November 14 in Hong Kong, a member of staff from Hainan Airlines told China Daily. Robert Yip Kwong, former head of the Hong Kong carrier, is now vice-chairman.

CR Airways, founded in 2001, covers routes from Hong Kong to regional cities nearby. It also offers charter flights through its associated company Rainbow Jet.

Since the beginning of this year, CR Airways has launched direct flights from Hong Kong to secondary mainland cities, such as Nanning and Guilin, Guangxi Zhuang Autonomous Region, Kunming in Yunnan Province, Jinan in Shandong Province, and Haikou in Hainan Province.

Its primary mission, according to the company's website, is to fly business travellers to secondary cities in the Chinese mainland directly from Hong Kong.

"The routes operated by CR Airways could complement those of Hainan Airlines," said Guo Dongmou, an aviation analyst at China Merchants Securities.

"It could enrich Hainan Airlines' aviation network by linking the Chinese mainland's secondary cities with Hong Kong and with Southeast Asian destinations."

Hong Kong's Dragonair and Cathay Pacific are competing head-to-head with the mainland carriers Air China, China Eastern and China Southern on the mainland to Hong Kong air routes.

"The take-over could give Hainan Airlines a foothold in Hong Kong, an important international gateway," Guo said.

He said it was not easy for Hainan Airlines to get a significant foothold in Beijing, Guangzhou or Shanghai since China's three largest aviation groups Air China, China Southern and China Eastern have a strong presence in these cities.

The take-over of CR Airways is not HNA's first attempt at an overseas expansion.

Early last year HNA made a bid to take over the loss-making Hungarian national airline Malev. But the Chinese carrier pulled out of the bid in October last year after reviewing a feasibility study.

HNA said it would have faced too many obstacles due to Hungarian government policy. But analysts proposed that the real reason for the pullout was because Hainan Airlines' flights on the Haikou-Beijing-Budapest route were struggling.

Also they said the Chinese carrier's small aviation network in Europe would fail to turn Budapest into a major gateway to other European countries.

(China Daily 11/25/2005 page11)