Avolon’s China parent denies rival’s claims of embezzlement

EMBATTLED Chinese conglomerate HNA Group has denied accusations of embezzlement and financial irregularity made by a rival group of shareholders in Hong Kong Airlines (HKA) as the two sides fight for control of the struggling carrier.

HNA is the main shareholder in Irish aviation leasing giant Avolon, through subsidiary Bohai Holding. Another Hong Kong-based investor, property developer CK Asset Holdings said this month that it is open to buying HNA’s remaining stake in Avolon if it is put up for sale.

The allegations against HNA were made by Zhong Guosong and Frontier Investment Partner who between them control 61pc of HKA’s shares. On Tuesday, they declared they had taken control of the carrier and made Mr Zhong, a former HKA director, chairman after an extraordinary shareholder meeting. The pair said on Wednesday, via a spokesperson, that an investigation had been launched into “the embezzlement of HKA assets and serious financial misappropriation by HNA Group parties”.

In an emailed statement to Reuters on Friday, HNA said that the allegations “are false”.

“HNA Group is committed to the highest standards of integrity in all of its activities and expects the same of all of its representatives,” it added.

HKA’s website still lists Hou Wei as chairman. He joined HKA in September last year after more than four years with HNA-controlled Hainan Airlines.

HNA holds about 29pc of HKA, having cut its majority holding two years ago.

This week’s battle comes as HKA is struggling to survive. Earlier this month, airline executives told shareholders the company needed at least HK$2bn (€) or risk losing its operating licence.

Zhong and Frontier representatives at that meeting, however, demanded details of the 2018 accounts and questioned the close ties between HKA and HNA affiliates, which include loans and equity investments by HKA to HNA groups, according to HKA’s 2017 accounts seen by Reuters.

HNA said the allegations are false and it ‘is committed to the highest standards of integrity’