The delisting turmoil is not difficult, and continuing to fly steadily is the way for the long-term development of HNA Holdings
Text | Zhao Yaqing, Wang Jingyi
Edit | Wang Jingyi
HNA Holdings (600221. SH) is facing a tough battle to defend its market capitalization.
In late June, HNA Holdings' share price fell to as low as 1.02 yuan, and China's fourth-largest airline with a market capitalization of nearly 50 billion yuan was at risk of delisting. The company responded quickly, introduced several measures to protect the disk, and major shareholders also promised to increase their holdings, and the stock price rose. The stock price closed at $1.1 at the end of July.
Zhu Tao, chairman of HNA Holdings, who has just taken office, said in an exclusive interview with us: "The irrational decline in the share price of HNA Holdings has deviated from the company's good production and operation fundamentals. ”
In 2023, HNA Holdings' revenue will be 58.6 billion yuan, and the net profit attributable to the parent company will be 311 million yuan, successfully turning losses into profits. The net profit in the first quarter of 2024 will reach 687 million yuan, exceeding the level of last year. According to the performance forecast, in the first half of 2024, HNA Holdings expects a loss of 600 million yuan to 670 million yuan.
Investment analysts believe that the decline in the share price of HNA Holdings is, to a certain extent, affected by the tide of "face value delisting" of enterprises in the first half of this year, and the closer to the price of 1 yuan, the greater the decline of stocks; But at a deeper level, it is still inseparable from the heavy burden of historical debt.
As of the end of the first quarter of 2024, HNA Holdings' asset-liability ratio was as high as 98.46%, with total liabilities of about 132.7 billion yuan. Among them, current liabilities were about 33.7 billion yuan, accounting for about 25.4%; Non-current liabilities amounted to approximately RMB99 billion, accounting for approximately 74.6%.
Although there is dual pressure on stock price and debt, HNA Holdings is also trying to increase revenue and reduce expenditure.
First of all, it strengthened cost control, and the amount of cost reduction and efficiency creation in two and a half years was 13.7 billion yuan, far exceeding that of peers; In terms of service, all differentiated service airlines under HNA have transformed to full-service as a whole.
In terms of safety, HNA has increased its investment in safety management, and has invested up to 3.94 billion yuan in aircraft engine maintenance and aviation material consumption in 2023, of which the holding company Genesis Aero Engine Maintenance Engineering Co., Ltd. has become the only factory in Chinese mainland that can repair the wide-body aircraft GEnx-1B, and the potential output value of 300 million US dollars is waiting to be released.
Zhu Tao said: "The civil aviation industry is an industry that is constantly exploring and innovating in the inheritance. Safety is the lifeblood of an airline, and service is the core competitiveness of an airline. ”
HNA Holdings, which is burdened with debt and stock price pressure, with 334 planes, believes that the market and time will give the answer to where to fly, how to fly, how to fly, and how to fly well.
01
The stock price is approaching the "red line" of 1 yuan for delisting
In December 2021, HNA underwent bankruptcy reorganization and its subsidiaries officially joined Fangda Group.
Half a year after the introduction of Fangda Group, HNA Holdings achieved "star picking" on May 18, 2022, and in September of that year, ST HNA officially took off its hat and changed its name to "HNA Holdings".
According to the financial report, HNA Holdings will achieve revenue of 58.6 billion yuan in 2023 and a net profit attributable to the parent company of 311 million yuan, successfully turning losses into profits and becoming the only profitable airline among the four major airlines.
More than two years after bankruptcy reorganization and change of ownership of Fangda Group, New Hainan Airlines has gradually stepped out of the shadow of the past.
Image source IC
Unexpectedly, in June 2024, another market value crisis broke out. Since June, the A-share share price of HNA Holdings has continued to fall, and on June 28, the stock price touched 1 yuan per share, hitting a new low since November 2008, approaching the "red line" of delisting at the face value of 1 yuan; On the same day, the closing price of Haikong B shares (900945) was US$0.138, which was also close to the warning line of RMB 1.
The red line of delisting is approaching, and HNA Holdings takes the lead in launching a self-rescue action in the B-share market, which has a small circulation and is easy to rise.
According to Article 9.2.1 of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, a listed company that issues both A shares and B shares on the Shanghai Stock Exchange will be delisted at par value when the stock price of both A shares and B shares is lower than the par value (RMB 1 per share) for 20 consecutive trading days.
It is understood that due to foreign exchange control and other factors, the B-share itself lacks liquidity, the daily trading volume is only 10,000-50,000 US dollars, and the total share capital of HNA Holdings is 364 million shares, accounting for only 0.84% of its total share capital of 43.216 billion shares.
On the evening of June 30, American Aviation LDC., one of the controlling shareholders, increased its holdings of 2,566,200 B shares of HNA Holdings through centralized bidding transactions, accounting for 0.01% of the total share capital of the listed company, and plans to continue to increase its holdings of B shares of HNA Holdings within 6 months from June 28, with an amount of not less than 5 million US dollars and no more than 10 million US dollars (including the amount of increased holdings on June 28). Aviation LDC. holds 216 million B shares of HNA Holdings, accounting for 58.49% of the total number of B shares.
Investment analysts believe that this move has further increased the stability of HNA's B-share market, and as long as the B-share share price continues to remain in the range of 1 yuan per share and above, HNA will not be delisted.
In addition, HNA has also taken action in the A-share market, and Shanghai Fangda Investment Management Co., Ltd., an affiliate under the same control of the company, launched a plan to increase its holdings of the company's A-shares on July 8, with an increase of 60 million to 119 million yuan within six months.
Courtesy of the company
In addition to the major shareholder's commitment to increase their holdings, HNA Holdings has also issued a number of announcements on the latest development of its business, such as publicly disclosing the "Action Plan for Improving Quality and Efficiency and Valuing Returns" in 2024 to protect the stock price. As of July 29, the share price of HNA B shares has stabilized at more than US$0.170, equivalent to about 1.24 yuan.
Up to now, HNA Holdings' A-shares have not been below 1 yuan, and B-share prices have begun to rebound.
"Stock price trends are affected by many complex factors such as the overall market situation, industry situation, and market sentiment. Since the reorganization, HNA Holdings' production and operation have continued to improve, and its operating performance has continued to improve, and in this context, if there is a risk of delisting for reasons other than the company, it is not in line with the expectations and interests of the company, shareholders, creditors and all sectors of society. Zhu Tao said to us.
02
Heavy debt, but began to turn a profit
In Zhu Tao's view, "the recent irrational decline in the share price of HNA Holdings has deviated from the company's good production and operation fundamentals." ”
What are the company's fundamentals? The financial numbers give the answer.
2023 is the second full fiscal year for HNA bankruptcy reorganization and Fangda Group's entry into the market, with the background of civil aviation recovery after the epidemic, this year HNA Holdings ushered in the good news of performance after five years, achieving operating profits, revenue of 58.6 billion yuan, and net profit attributable to the parent company of 311 million yuan, successfully turning losses into profits.
Courtesy of the company
According to the plan, 2022 is the year of consolidation, 2023 is the year of consolidation, and 2024 is the year of great development.
In the first quarter of 2024, HNA Holdings' performance continued to rise: revenue was 17.55 billion yuan, a year-on-year increase of more than one-third, and net profit attributable to the parent company was 687 million yuan, a year-on-year increase of more than 3.3 times.
According to the latest disclosed performance forecast, in the first half of 2024, HNA Holdings expects a loss of 600 million yuan to 670 million yuan, and if foreign exchange losses are excluded, the operating profit is expected to be positive. It is worth noting that HNA Holdings has significantly reduced its losses year-on-year, with a loss reduction range of 60.44%-64.60%, which is the largest loss reduction among the four major airlines. Objective comparison, this is much better than the three major airlines that lost about 2 billion yuan respectively.
In terms of operations, in the first quarter of 2024, the company achieved a total turnover of 2.853 billion ton-kilometers, an increase of 33% year-on-year; 17 million passengers were transported, an increase of 23% year-on-year; The number of flight trips reached 112,000, an increase of 15% year-on-year, and the number of flight hours was 288,500, an increase of 21% year-on-year.
Courtesy of the company
By the end of 2023, HNA Holdings operated 334 aircraft with an average age of 9.08 years.
In the case of continuous improvement in fundamentals, the reason for the decline in stock prices has a lot to do with HNA's high asset-liability ratio.
According to the data, affected by the reorganization and the epidemic in 2022, the asset-liability ratio of HNA Holdings reached 101.91% in the first half of the year and 108.86% in the third quarter.
According to the Reorganization Plan of HNA Holdings and Ten Subsidiaries (Draft), the huge debt repayment plan mainly includes debt-to-equity swaps, debt repayment by major shareholders, and repayment of retained debts. At present, China Development Bank and China Construction Bank have entered the ranks of shareholders of HNA Holdings, with current shareholding ratios of 2.22% and 1.52% respectively.
As of the first quarter of this year, HNA Holdings' total liabilities were about 132.7 billion yuan, of which short-term borrowings and non-current liabilities due within one year exceeded 15 billion yuan, and the asset-liability ratio was about 98.46%, down 15.06 percentage points from four years ago. During the same period, the asset-liability ratios of Air China, China Southern Airlines and China Eastern Airlines were 89.73%, 83.03% and 85.3% respectively.
HNA Holdings recently said in response to investors' questions that although the scale of debt retention in reorganization is large, the term of debt retention in bankruptcy reorganization is set at 10 years, the proportion of principal repayment is low before and then high, and the company's debt retention interest is 2.89%, which is far lower than the company's average financing interest rate before the reorganization, so the company's debt repayment pressure is less in recent years.
At present, the company has completed the signing of the debt retention agreement with all the debt retention creditors, and completed a total of 5 interest payments and the first 2% principal repayment on time in accordance with the debt retention agreement, and will repay the principal in accordance with the reorganization plan and the agreement in the future.
03
While throttling, open source at the same time
Under the dual pressure of low stock price and debt, HNA Holdings began to transform from operation.
Zhu Tao said: "The company started from multiple dimensions such as internal process optimization, operational efficiency improvement, and cost control to plug the 'leakage', effectively reduce operating costs and improve overall profitability while ensuring high-quality services. ”
In terms of aircraft costs, HNA Holdings has saved 608 million yuan in fuel expenditure by carrying out normalized energy-saving and emission reduction projects such as aircraft center of gravity control, shortening ground taxiing time, and controlling residual fuel on landing, and has also done more refined cost control work in aircraft leasing, aviation material procurement, aircraft maintenance, take-off and landing costs, etc.
Courtesy of the company
In terms of energy conservation and emission reduction, a number of personalized measures have been carried out. For example, it pioneered the "connection on arrival" guarantee mode, which automatically connected to the GPU after the flight landed, greatly reducing the use time of the ground APU. Since the system was launched at the end of 2022, as of June 2024, it has saved 9,700 tons of fuel and reduced carbon emissions by 30,000 tons.
For aircraft drinking water, HNA Holdings has developed and launched the industry's first drinking water filling management system, which realizes the precise control of drinking water filling volume, saves 1,100 tons of fuel annually, and reduces carbon emissions by 3,400 tons.
Starting from every drop of oil and every drop of water, in 2023, HNA Holdings will achieve 3.6 billion yuan in cost reduction and efficiency, and China Eastern Airlines will increase its efficiency by 1.31 billion yuan in the same period.
Since 2024, Hainan Airlines has continued to accelerate the recovery of international routes.
As of July 10, Hainan Airlines has operated 42 international routes (excluding routes from Hong Kong, Macao and Taiwan), covering North America, Europe, Africa, the Middle East, Australia and New Zealand, Northeast Asia and Southeast Asia. The weekly number of international flights is about 290 (2 flights per round-trip), which has recovered to about 72% of the pre-pandemic level.
Recently, Hainan Airlines has resumed and opened 5 new international routes, including Shanghai-Brussels, Beijing-Phuket, Beijing-Prague, Beijing-Tijuana-Mexico City, Shenzhen-Budapest international routes, and is expected to open more than 10 international routes covering Europe, Asia and other countries in the second half of the year.
Courtesy of the company
"Hainan Airlines' recovery rate in the European and Russia route markets is particularly prominent, and the weekly flight volume of European routes has recovered to about 126% of the pre-epidemic level; The weekly flight volume of Russia routes has returned to about 200% of the pre-pandemic level. The recovery rate of Australia, New Zealand and the Middle East routes is about 80% and 65% respectively. Zhu Tao said.
For the domestic market, HNA Holdings has launched five high-frequency "boutique express lines" between Beijing and Haikou, Sanya, Guangzhou, Shenzhen and Chengdu, clearly focusing on the core business market with high load factor and carrying potential.
The "Boutique Express" has a more even distribution of flight schedules, gives priority to the use of wide-body aircraft, and has carried out a comprehensive upgrade in cabin services, so as to improve the comfort of passengers and enhance the carrying capacity and market competitiveness of flights.
At the same time, the summer season is coming. According to the official website of Hainan Airlines, a holding company of Hainan Airlines, Hainan Airlines expects to launch 343 aircraft in major markets such as Hainan, Beijing, Guangzhou, Shenzhen, Xi'an, Urumqi, Kunming, Fuzhou and Nanning during the summer transportation period from July to August. It is estimated that more than 1,400 shifts will be performed per day, an increase of 12% compared with 2023; The number of passengers carried was about 13.66 million, an increase of 10% compared to 2023.
In addition to the flight business, HNA Holdings will also expand its live broadcast business. HNA Holdings announced that it will jointly invest in the establishment of Hainan HNA Preferred Business Co., Ltd. (hereinafter referred to as "HNA Preferred") with a registered capital of 30 million yuan, and the two will contribute 15.3 million yuan and 14.7 million yuan respectively.
According to the announcement, HNA's preferred main business includes Internet live broadcasting, sales business, etc. HNA Holdings believes that the construction of the live broadcast platform can "improve the sales of the company's air tickets and ancillary products", and at the same time, the company can also use the live broadcast platform to expand its business scope and create new profit growth points.
On June 23, HNA Aviation Group issued a notice mentioning that the live broadcast room it built in the HNA Building has begun to show scale, with an exclusive image wall for anchors and a supermarket for product selection. At the end of the notice, recruitment information for a number of positions such as professional live broadcast, live broadcast operation, short video editing and directing, short video photography and editing was also released.
04
Keywords: security and services
Safety and service are the key words for future development given by Zhu Tao, "Safety is the lifeline of airlines, and service is the core competitiveness of airlines." ”
In terms of services, HNA is gradually implementing the "transformation of full service" proposed in mid-2023.
There are many airlines under the umbrella of New Hainan Airlines, including Hainan Airlines, a five-star airline, and low-cost West Airlines, as well as many local airlines such as Capital, Tianjin, Lucky, Fuzhou, Urumqi, Beibu Gulf, and Suparna Airlines. In mid-2023, New Hainan Airlines will undergo a major transformation, and all its differentiated service airlines will transform to full-service as a whole.
Courtesy of the company
The most intuitive is the unified service image of Hainan Airlines, and the uniforms of the company's cabin attendants and ground service personnel have been replaced with the "Haitian Xiangyun" package.
In terms of the optimization of basic services such as luggage and meals, each of its airlines has its own advantages, such as the palace series of delicacies and old Beijing special meals launched by Capital Airlines, Tianjin steamed buns and Tianjin twist added by Tianjin Airlines, the special menus of southern Fujian launched by Fuzhou Airlines, and the new Xinjiang Dapan Chicken series meals launched by Urumqi Airlines.
In terms of safety, HNA Holdings continued to increase its investment in safety management.
According to the data, in 2023, the cumulative investment in aircraft engine maintenance and aviation material consumption will be as high as 3.94 billion yuan, "although this is an expense, it ensures the safety and reliability of maintenance, avoids the huge losses that may be caused by the risk of failure, and is also a cost reduction measure from a long-term perspective, laying a solid foundation for the company's sustainable and stable development." Zhu Tao said.
Among them, it is worth mentioning that HNA's investment in aircraft engine maintenance is not simply to send to the factory for maintenance, but to build a factory for maintenance.
In 2021, HNA Holdings, Haikou Construction Engineering Group Co., Ltd. and Hainan Haikong Asset Management Co., Ltd. jointly invested in the registration of Haikou Meilan Airport Genex Aero Engine Maintenance Engineering Co., Ltd. (hereinafter referred to as "Haikou Genes"), which specializes in engine maintenance, and obtained the FAA maintenance qualification license at the end of 2023, making it the only GEnx-1B engine maintenance company in Chinese mainland with the highest level of authorization from GE in United States.
Courtesy of the company
The upfront investment in building a factory is huge, but the future return should not be underestimated.
The average widebody has two GEnx-1B engines, and each of them costs several million dollars to repair. During the visit, Ding Guoqing, chairman of Haikou Jinas, told us that the plant has an annual design capacity of 60 engines, which means that it is expected to be able to repair 60 engines a year. A simple calculation shows that under the state of full production capacity, the annual output value will be hundreds of millions of dollars.
At present, the company's annual order for 2024 plans to repair 8 units, which is in the initial stage of word-of-mouth fermentation, and the existing customers are basically from the HNA 787 fleet. In the future, we will gradually expand the scope of customers, not only to do our own business, but also to do business with outsiders, including engines sent by other domestic airlines and Southeast Asian airlines for repair.
In addition to having the only maintenance qualification, HNA Holdings also has the advantage of aviation materials.
First, in terms of the number of aviation materials, HNA Holdings' aviation materials warehouse has a lot of aviation materials, including replacement parts that are inevitable for engine maintenance; Second, in terms of the price of aviation materials, the Hainan Free Trade Zone provides HNA with a unique price advantage, in addition, affected by the global supply chain, the price of aviation materials has risen sharply this year, and HNA may benefit from it.
In Zhu Tao's view, in the future, the company will continue to deepen the operation of its main business, do a good job in aviation safety production and operation, continuously improve service quality, develop more market-competitive routes and aviation products, continue to introduce aircraft according to the development plan, pay close attention to market demand, adjust and optimize the fleet structure, and continuously enhance the competitiveness of the enterprise.