(Yicai Global) May 20 -- Hainan Airlines Holding jumped by its daily trading limit after a unit of Fosun International said it is setting up a CNY40 billion (USD6.2 billion) aviation investment fund. The money is destined for the carrier, which is undergoing bankruptcy restructuring, a source told Yicai Global.

Hainan Airlines [SHA:600221] rose 5.2 percent to end today at CNY1.81 (28 US cents). Gains by firms at risk of being delisted are capped at 5 percent rather than the usual 10 percent. Yuyuan Tourist Mart Group [SHA:600655], which will form the fund with other investors, surged 10 percent to CNY13.08 (USD2).

Yesterday’s statement from Shanghai-based Yuyuan Tourist, which will contribute CNY10 billion to the fund, did not name any investment target. It said only that the move is aimed at seizing opportunities in Hainan province.

Hainan Airlines, which was placed into bankruptcy reorganization in February due to unpaid debts of over CNY200 billion (USD31 billion), is in talks with four interested parties, including Fosun International and Juneyao Air, the source said. Juneyao Air announced late last month that it was forming a partnership to invest CNY30 billion in aviation.

Fosun, a Shanghai-based financial and industrial conglomerate, has already invested more than CNY30 billion in Hainan as China turns the southern island province into the country’s biggest free trade zone.

Promising Future

By participating in Hainan Airlines’ restructuring, Yuyuan Tourist would improve its positioning in the consumer sector, enhance coordination of industrial resources in Hainan and direct 100 million customers to Fosun’s business empire each year, the source added. 

As one of China’s major carriers, Hainan Airlines is promising in the mid-to-long run as consumer spending power increases and the global travel sector gets back on its feet after the Covid-19 pandemic, he said.

Hainan Airlines has been caught up in the financial difficulties of its parent company HNA Group. An overaggressive diversification drive saw the aviation-to-financial services conglomerate run up debts of USD94 billion by 2017.

By early 2018 it had sold over CNY300 billion (USD46.5 billion) of sideline businesses. The provincial government sent in a task force in February last year to help Haikou-based HNA with its risk management, but to no avail. The Hainan High People’s Court declared the firm bankrupt in March and ordered it to begin restructuring.

Editors: Tang Shihua, Kim Taylor