Hong Kong Airlines may have to cancel its HKD5 billion initial public offering (IPO) because of a consolidation plan within the HNA Group, which is designed to clear the way for Hainan Airlines’ CNY8 billion A-share placement. Shelving or canceling Hong Kong Air’s public share offering, which is scheduled for the third quarter, would put the brakes on the airline’s expansion ambitions including bidding for the redevelopment and conversion of the Mariners’ Club in Hong Kong’s Tsim Sha Tsui into a hotel, costing up to HKD4 billion. Hainan Air said it would acquire all the aviation-related assets held by controlling shareholders Grand China and HNA, and promised to avoid competing with units in the group. Hainan Air will hold as much as 39% of Hong Kong Air if the consolidation goes ahead. It now owns 19% of Hong Kong Air, while HNA and Grand China control a combined 20% stake. Hainan Air plans to raise not more than CNY8 billion through a private share placement on the Shanghai exchange by February 15 next year to repay bank loans.

In a recent report, the World Bank said: “It is now three years since the first high-speed rail line in China opened. The total volume carried is already larger than the French TGV services and is rivaling the Japanese Shinkansen services. It will continue to grow rapidly as many lines under construction are completed, and as urban incomes and urban population in China continue to rise.” China had the world’s longest high-speed railway network, with 11,000 kilometers as of the end of last year. In 2010, 290 million passengers rode trains traveling at 200 km/h or faster in China, the World Bank said. In comparison, the Shinkansen carried 342 million passengers in 2007 while France’s version transported 114.5 million passengers in 2010. The growth of passengers on China’s high-speed rail service is striking because it has been achieved in only three years. The TGV began operations in 1981 and Shinkansen in 1964. High-speed rail has attracted passengers from conventional rail, air services and buses. However, the impact of the new links on air travel seemed to diminish beyond 1,000 km, the World Bank said, with the 1,318-km high-speed rail link between Beijing and Shanghai having little effect on air travel between these two cities. Beijing-Shanghai high-speed trains were often 60% empty. Most high-speed rail lines might need to reschedule repayment of their debt principal, given that only a handful of systems worldwide would be able to repay their debts, the World Bank said.

Finnair aims to double its flights to Asia by 2020 from the current frequency of 74 per week, said Mika Vehvilainen, CEO of Finnair. The route linking Chongqing and Helsinki will be the next flight to be launched, starting in May. Finnair has the fifth-largest market share on Asia-Europe routes, and aims to become one of the top three carriers as aviation traffic between Europe and Asia grows by 6% to 10% per year. Vehvilainen said China would continue to increase in importance for Finnair. Chongqing is becoming popular among international carriers because of a policy that took effect there this year, under which airlines can obtain jet fuel at prices of as much as 23% below usual levels. As many as 13 international routes from Chongqing were opened in 2011, but international flights serving the city are still far from profitable. “For at least three years, Finnair doesn’t expect to make profits from the scheduled route from Chongqing to Helsinki,” said Mikko Rautio, Finnair’s Chief Representative in China. To benefit from opportunities, airlines must be present even before a market becomes profitable, Rautio added. “Xian and Wuhan are both candidate destinations in China,” Rautio said. Finnair is focusing on China’s western areas because of the government’s plan to develop the region.

Shanghai plans to build its second business aviation base at Pudong International Airport in about three years to cater to a growing private jet market. The base, and the current Shanghai Hawker Pacific base at Hongqiao airport, are part of a broader plan to build the city into a major business aviation hub. The Hongqiao base began operations in 2010. Shanghai’s airports handled 3,500 departures and landings of business aircraft last year, about 33% of China’s total. It is expected the number will grow by about 10% to 15% this year and rise to 6,000 over the next two to three years. There were 137 private jets registered in China last year, compared to 32 in 2008. The number of business jets is expected to increase to 1,000 within 10 years, insiders said, while some estimate 2,360 by 2030. Companies, including Airbus, Boeing, Bombardier and China Eastern Airlines, last week established a Business Jet Shanghai Alliance to promote the market. They are calling for a reduction in taxes and increased access to airspace. Taxes are as high as 23% for an imported business jet compared to 12% for civil passenger planes. There are far too few airports for business jets, said Kong Linshan, President of Minsheng Financial Leasing Co, a business jet buyer. Ten business jets were sold on the first day of the inaugural Asia Business Aviation Conference and Exhibition at Shanghai’s Hongqiao International Airport. More than 150 exhibitors and about 5,000 to 6,000 visitors, were expected at the three-day exhibition. Gulfstream and private jet-leasing companies including Asian Sky Group and Vistajet also signed purchase contracts. Christophe Degoumois, Vice President of Business Aircraft Sales at Canada’s Bombardier, said that 2,360 business jets will be delivered to China by 2030.

Xia Xinghua, Deputy Director General of the Civil Aviation Administration of China (CAAC), said in Shanghai that 48 private-jet-charter start-ups were now awaiting the CAAC’s approval to enter the market. Last year there were only nine such operators in China. He said the government was ready to shorten the approval process, to make it easier for charter-jet companies to acquire new aircraft. At present it takes three months on average for an operator to get approval. “The number of [available slots] at airports for business jets is not enough,” Xia said. “Also, the management of airspace, air routes and flight plans can be improved.” There are only 180 airports in China that allow private jets to land and take off, compared with 15,000 in the United States. Xia said the government would invest in infrastructure and hoped to cut the approval time for flight plans to three days or less in future. In the short term, the regulator would approve only about 30 new operators by 2015, to ensure safety standards. Xia also said the import tax for private jets was too high with a 17% value-added tax and a tariff of at least 4%.

Kerzner International Holdings, based in Dubai, whose flagship brand is Atlantis in the Bahamas and Dubai, plans to open its first Chinese resort in early 2014 in Tufu Bay in Sanya. The planned resort will take up an area of 16 hectares and have a half-kilometer coastline. The city now boasts a greater density of high-end hotels than any other city in China, including Beijing and Shanghai. Sanya’s local government said there are 223 tourism hotels in the city, including 13 five-star hotels, 20 four-star hotels and 26 hotels that have been built to a five-star
standard, but have yet to be graded. Almost every famous hotel brand has opened a hotel in Sanya. Marriott International  opened its third hotel in Sanya last June and has two more in the pipeline. Marriott’s Ritz-Carlton Sanya located on Yalong Bay is the most successful Ritz-Carlton in the world, Paul Foskey, Chief Development Officer of Asia Marriott International said. St Regis Hotels and Resorts International also invested CNY2.5 billion in its first Chinese resort in Sanya.