HNA investment in a US airline would boost Hainan Airlines in US-China market, reshape competition

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HNA, the holding company that owns flagship airline Hainan Airlines, has grown a portfolio of airline investments outside greater China that has recently expanded to Brazil's Azul, and could be extended to include TAP Portugal. Some of the stakes have been placed to allow HNA to be an active investor and boost its presence in the foreign market. With this general strategic objective - and cash to spend - it is logical for HNA to consider investing in a US airline.

China's 'one airline, one route' policy generally permits only one Chinese airline to fly a long haul service. Hainan cannot serve blue-chip points like New York and Los Angeles from Beijing and Shanghai since Air China and China Eastern already serve those points. Hainan has instead developed a mostly secondary market network including Boston and Seattle. Purchasing a US airline to have it expand in China, or to launch all-new flights, would overcome these restrictions since there is no US limit on services as long as traffic rights are available. American, Delta and United all serve the Los Angeles-Shanghai route.

China-US open skies would permit HNA and its US partner to enter into a joint venture, and even share profits. Integration has not been a defining feature of HNA's investments, but the potential ramifications of a US airline investment could be significant and wide-reaching. This potential trans-Pacific change comes as Canada's WestJet weighs an entry into Asian routes.

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