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Economy

Chinese bidders circling German airports

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A direction sign to Frankfurt Hahn airport   © Reuters

HAMBURG, Germany -- Chinese aviation investors are circling Frankfurt's Hahn Airport as an auction nears completion in the latest of a wave of airport sales by German state governments seeking to stem operating losses.

German media reports suggest that at least three Chinese investors are preparing bids for Hahn, a loss-making third-tier airport, the Rhineland-Palatinate state government agreed to sell for an undisclosed sum to China's Shanghai Yiqian Trading in July.

The sale fell through after Shanghai Yiqian, a little known construction and logistics company, failed to close the deal. The company, which has not commented publicly, is alleged in a criminal complaint filed by the Rhineland-Palatinate state government to have submitted fraudulent documentation.

Hahn was hit hard in 2015 when Shanghai-based Yangtze River Express, a cargo airline subsidiary of Chinese aviation conglomerate HNA Group, withdrew its business after shifting its operations to Munich. However, Irish budget airline Ryanair, one of the world's biggest low-cost airlines, still uses Hahn.

Local media say that suitors for Hahn include China's Alibaba Group Holding and LinkGlobal Logistics, which bought the smaller Parchim Airport in northeastern Germany in 2007 from Parchim County, a local authority, but has run into financial problems.

However, local hopes are pinned on ADC, a German company directed by Siegfried Englert, a professor of Sinology at Ludwigshafen University's East Asia Institute and a former Rhineland-Palatinate state government official.

Englert told the Nikkei Asian Review that ADC was in partnership with HNA to bid for 82.5% of Hahn airport in a fresh auction being run by professional services firms KPMG and Warth & Klein Grant Thornton. Companies were asked to submit bids by Sept. 1, although the state government has said this was not a hard deadline.

The new bid would be ADC's second attempt to acquire Hahn -- it failed with a token offer of 1 euro ($1.12) in the previous round.

"I just want to utilize my very good connections in China to do something for Hahn's future," said Englert, according to an Aug. 6 report by the Frankfurter Allgemeine Zeitung newspaper.

Englert, who served as an undersecretary of state in Rhineland-Palatinate from 2006 to 2011, told the newspaper that a "strong aviation partner" could greatly increase air traffic at Hahn. He also said the nearby birthplace of Karl Marx, the city of Trier, could draw Chinese tourists, particularly in 2018, the 200th anniversary of Marx's birth.

Englert said that Chinese civil aviation pilots could be trained at Hahn, and that Chinese-made electronic goods could be assembled there, giving them a valuable "Made-in-Germany" tag.

KPMG declined to be interviewed on the auction, which has drawn 13 expressions of interest. None of the names of the companies involved have been announced, and none has commented publicly except ADC.

Track record

HNA did not respond to a request for comment from the NAR, but its recent track record in the region is strong. Earlier this year, HNA took over Swiss airline caterer Gategroup, ground handling services company Swissport as well as Ireland-based aircraft leasing company Avolon.

Frankfurt Hahn Airport

Gategroup is reportedly considering selling its airline-catering service unit Gate Gourmet to HNA shortly, and HNA is understood to have bought a small hotel in Bad Schwalbach, which is close to Hahn.

In what may be a strong sign of its ambitions for Hahn, ADC in July bought two buildings adjacent to the airport for a reported combined sales price of 3.75 million euros.

Brian King, associate dean at Hong Kong Polytechnic University's School of Hotel and Tourism Management, said HNA's acquisition spree in Europe reflected its ambitious quest for "global vertical and horizontal integration."

The Hahn sale is one of a series of German airport sales as state governments try to reduce losses. Hahn's debts totaled 133 million euros at the end of 2014, when it was partly bailed out by the state government.

Wolfgang Georg Arlt, director of the Beijing-based China Outbound Tourism Research Institute, said German governments were so keen to sell that they were letting their guard down and could unwittingly fall prey to scams.

A Chinese investor called Chen Yongqiang bought loss-making third tier Luebeck Airport from the city of Luebeck in 2014 for an undisclosed sum, with the promise of luring Chinese airline services to Germany's north, while also training Chinese pilots there. In September 2015 the airport operator, PuRen Germany, declared bankruptcy, and Chen has not been seen in Germany since.

The sale of Parchim Airport, also in the north of Germany, fell through after LinkGlobal Logistics, chaired by Jonathan Pang, failed to pay the agreed price of 30 million euros. However, the state government has allowed LinkGlobal to operate Parchim because the company is shouldering the airport's bills of 30,000 euros per month. Passenger numbers are low in both Luebeck and Parchim, but pilots are training in Parchim.

Artl said he doubted that HNA was a serious bidder for Frankfurt Hahn. "My theory is that HNA isn't really in the picture," he said.

"HNA would never want Hahn for its [affiliate] Hainan Airlines, China's largest privately owned airline, as it is a little used route. What HNA wants is a slot at Hahn's much bigger neighbor Frankfurt Airport, a key connection point for major Chinese airlines such as Air China and China Eastern Airlines."

Alexander Licht, a delegate for the opposition Christian Democratic Union in the state parliament of Rhineland-Palatinate, and the CDU's spokesman on the Hahn deal, told the NAR that bidders must be able to invest in the state in accordance with local law and after reasonable reviews.

"There is speculation over possible bidders in the airport deal, including over bidders' contacts with HNA Group," Licht said. "How trustworthy these references actually are and how they are to be evaluated reliably will only become clear in the coming weeks," he added.

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