HNA considers selling Hong Kong Airlines: investors may be shy

A few years ago any discussion of an airline being for sale was almost always inevitably linked to Etihad Airways and HNA evaluating a purchase. Etihad has halted expansion of its equity network, while HNA is going further and evaluating opportunities to sell assets. This includes Hong Kong Airlines, one of the flagship units in the group.

There is speculation that HNA has too much pride to sell Hong Kong Airlines, unless for an exceptional price. Then again, selling Hong Kong Airlines could be easier: unlike HNA's airlines in mainland China, Hong Kong Airlines has no government ownership, and the local market has a more open regulatory environment. But more pragmatically, HNA has non-aviation assets that are not core to its business, and could fetch a higher price.

Hong Kong Airlines is in the midst of a significant expansion period defined by A350 services to North America and soon A330s to continental Europe. This plan will be tested against the airline's lack of a strong connecting market.

Hong Kong Airlines has not yet captured significant corporate traffic, so its mostly leisure focus may be challenged by rising fuel prices. Although a sale appears difficult, independence would allow Hong Kong Airlines to grow strategically. The Hong Kong aviation hub is rapidly changing as Cathay Pacific restructures and seeks to regain the initiative.