(Yicai Global) July 28 -- China Fangda Group is not withdrawing from struggling Hainan Airlines Holding, which the Chinese chemicals and steel manufacturer took over in December last year, the chairman said recently in response to rumors that it is planning to pull out soon.

“If someone asks you again if Fangda will exit, please ask them who they think is up for the job? Will anyone else take on this task? Try to find someone. And even if you do, Fangda is not leaving,” Fang Wei said at a recent semi-annual work conference of parent firm HNA Aviation Group.

Last December, Beijing-based Fangda bought a controlling stake in insolvent HNA for CNY38 billion (USD6 billion) and also threw in an additional CNY3 billion (USD472.2 million) to supplement working capital. It consolidated the group’s aviation business, which included 14 carriers including Hainan Airlines and Xinhua Airlines, into Hainan Airlines Holding.

“When we started to participate in HNA’s bankruptcy restructuring in July last year, we were told that the firm’s aviation business had net assets of CNY25.3 billion (USD3.7 billion),” Fang said. However, based on materials we received in November that year, these assets plunged to minus CNY14.9 billion, CNY40.2 billion below the original figure, he added. As a result, despite the cash injection of CNY38 billion, Hainan Airlines’ asset-to-debt ratio remains at around 100 percent.

“We hope to solve Hainan Airlines' debt issues by bringing in more capital,” Fang said. “But before we can start this, we need to wait for regulators’ probe into alleged violations of information disclosure to be completed and for the results to come out. Only then can Hainan Airlines’ 'Special Treatment' flag on the stock exchange, which indicates it has been in the red for three consecutive years, be removed," he added.

On top of this, the Covid-19 pandemic has badly affected air travel and Hainan Airlines is bracing for losses of over CNY11.9 billion (USD1.7 billion) in the first six months, according to the first-half forecast released on July 14.

Fang hopes to start renting and purchasing planes in the second half, he said. Haikou, southern Hainan province-based HNA has over 800 planes and this could reach 1,000 in the next three to five years and 1,200 in the next five to ten years, he added.

Hainan Airlines is slowly building up a core leadership team. The carrier appointed its second new chairman this year in June. Cheng Yong, who retired from China Southern Airlines where he had been general manager since 2017, took up the reins. HNA has also undergone several top executive changes recently.

There will be another senior management shakeup at the end of the year, Fang said.

Editors: Liao Shumin, Kim Taylor