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China's Air Guilin Cancels All Flights Until Further Notice

As the conflict between Hainan Airlines Group (HNA Group) and the Guilin Government over the control of Air Guilin continues, Air Guilin ceased all flight operations on November 3rd.

According to a message circulating on the internet since November 1st, HNA Group has recently sent a letter to Air Guilin and the CAAC Central and Southern Regional Administration (one of the seven CAAC regional offices), stating that they will cease providing support services to Air Guilin starting from November 2nd. This includes key services such as HNA Group's maintenance management system and operational control system.

The message also suggests that if HNA Group indeed stops providing operational support to Air Guilin on November 2nd, there is a high likelihood that Air Guilin will have to suspend its flights.

On the afternoon of November 3rd, Chinese media Shangyou News contacted the controlling entity of Air Guilin - the Guilin City State-owned Assets Supervision and Administration Commission. A staff member responded, "The city government has established a special team to handle Air Guilin-related matters; for specific details, you should inquire with the special team." However, the staff member on duty further said, "There is no contact information for the special team."

The confusing ownership issue of Air Guilin

In October last year, Simple Flying extensively reported on the incident where HNA Group ordered Air Guilin to cease its salary reduction plan.

At that time, HNA Group claimed that they learned of Air Guilin's salary reduction plan through social media. In the official letter, it was pointed out that Air Guilin's decision to cut salaries had not been communicated in advance to HNA Group in any form. Such a policy had already affected employee stability and had a negative impact on aviation safety.

he letter requested Air Guilin to strictly adhere to HNA Group's post-restructuring policy of "Three No Reductions," which means no reduction in the number of employees, no reduction in employee salaries, and no reduction in employee benefits. As well as sending the letter to Air Guilin, the HNA Group also copied in Guilin Traffic Investment Holding Group, wholly owned by the Guilin City Government. However, they did not copy relevant units within the Civil Aviation Administration of China.

According to the company registration information, Guilin Transportation Investment Holding Group, wholly owned by the Guilin City Government, holds 60% of Air Guilin. Guilin Air Travel Group, a subsidiary of HNA Group, holds the other 40%. However, a legal ruling made by the Hainan Provincial Higher People's Court on October 31st, 2021, suggests that Guilin Air Travel Group holds 100% of the equity in Air Guilin, following the restructuring of HNA Group.

According to members of the HNA Group's restructuring team, the court's decision to allocate ownership in this manner was due to the fact that the Guilin City Government had not completed its capital contribution to acquire a portion of the initial shares of Air Guilin. Based on this, Guilin Air Travel Group applied to the court to freeze the 60% equity stake in Air Guilin held by Guilin Transportation Investment Holding Group, and this 60% equity stake is currently frozen.

An ongoing dilemma

All of these background factors have led to the current dilemma. HNA Group believes that, according to the valid ruling, it holds 100% of the equity in Air Guilin, while the Guilin City Government argues that, considering all the financial support and resources it has provided, losing all of its equity is unfair.

Shortly after the court's ruling in October 2021, in January 2022, Guilin Transportation Investment Holding Group established an interim Communist Party committee at Air Guilin. This committee took full control of personnel appointments and financial records. They also directed Air Guilin not to participate in any meetings organized by HNA Group. On the other hand, the technical operations of Air Guilin were still managed by HNA Group. HNA Group is still responsible for maintenance management, spares support, and flight operations management, including pilot management at the airline.

Since that time, over the course of nearly two years, the dispute between the Guilin City Government and the restructured HNA Group regarding the ownership of Air Guilin has continued, ultimately leading to HNA Group discontinuing technical services. As a result, Air Guilin had to suspend its flights indefinitely starting from November 3rd.

This article originally appeared on Simply Flying.

Photo: Air Guilin

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