Several media reported that the Chinese government is considering a take-over of HNA group, leading to a surge of stocks related to the group, The share price of Hainan Airline Holdings Co, the carrier owned by HNA Group, rose by the 10% daily trading limit to close at CNY1.76 on February 2 in Shanghai. Shares of HNA Innovation Co, engaged in tourism and real estate development, also jumped by 10% while those of HNA Infrastructure, which offers airport management and infrastructure services, soared by 8.76%. The stock rally suggests that investors are considering a possible government take-over as positive. Bloomberg reported that the Chinese government also plans to sell off the group’s airline assets as the Covid-19 outbreak has hit the group’s ability to meet its financial obligations. The group became famous for its aggressive purchases of assets at home and abroad over the past few years, but recently it has disposed of a large chunk of its assets and started to focus on its core business in airlines and tourism as it ran into financial difficulties with mounting debts and strained cash flows.

As of June last year, the group had total debt of CNY525.6 billion while it had cash or short-term investment worth only about CNY50.4 billion. Now China’s airlines are feeling even more pressure due to massive cancellations following the Covid-19 outbreak. The daily volume of passengers by commercial airlines dropped substantially between January 25 and February 14 to a level of only one-fourth of the volume in the same period of last year, according to the Civil Aviation Administration of China (CAAC).