HNA Group may cancel order of 10 A380 aircrafts amid weak market conditions
The fast-expanding Hainan Airlines Group (HNA Group) reported that it may cancel an order of 10 A380 aircraft with a total list price of $3.8 billion, which analysts said Sunday highlights airlines' cautious attitude on fleet expansion amid weak market conditions.
According to Reuters Friday, Chen Feng, chairman of HNA Group, which just acquired a 48 percent stake in French airline Aigle Azur in October, said the A380s were ordered when the market was good, but now the company needs to strategize to face the gloomy global economy.
The large size of the A380 makes buying 10 of them difficult in these times, Chen was quoted by Reuters as saying on the sidelines of the ongoing 18th National Congress of the Communist Party of China (CPC) in Beijing, adding that the group will not make a big plane purchase next year.
"Orders that are already in the Airbus order book have not changed and, as usual, we do not comment on talks with customers," Robin Tao, an Airbus China spokesperson, told the Global Times via text Sunday.
While Chen did not name the airlines involved, industry insiders said the A380s on order were for Hong Kong Airlines under HNA Group, which operates more than 500 routes at home and abroad.
Hainan Airlines profits hit 1.2 billion yuan in the third quarter of this year, down 25.3 percent year-on-year.
In January this year, Airbus took an order from Hong Kong Airlines for the 10 A380 aircraft, and it plans to deliver the first in 2015. But in August, rumors swirled as the Financial Times reported a possible cancellation.
"It is unexpected but reasonable," Li Xiaojin, a professor at the Civil Aviation University of China, told the Global Times via phone Sunday.
According to Li, the nation's growth of transport volume has declined dramatically in recent decades: annual growth was more than 20 percent during the 1980s and 1990s, but the figure declined to more than 10 percent during the 2000s and now stands at less than 10 percent.
The data from the Civil Aviation Administration of China placed the growth of passenger transport volume in September at 9.5 percent year-on-year.
"The declined growth of transport volume thins profit for the airlines, adding to the pressures against their fleet expansion," Li said.
A380s are suited to long-haul flights, especially internationally, but Chinese airlines have a hard time competing with foreign carriers for customers, said Lin Zhijie, an independent industry expert.
HNA rival China Southern Airlines currently has four A380s flying routes of two or three hours, but their profit in the first half of this year was near 100 million yuan ($16 million), and insiders said the A380 could be a reason.
From October this year, China Southern shifted the A380 route to a Guangzhou-Los Angeles run. Industry insiders predicted that the intercontinental flights will improve the company's performance.
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