Thales, HNA Group deal, but will it really fly?

A couple dozen more Chinese wide-body aircraft are set to receive the Thales AVANT IFE system and high-speed inflight internet systems. HNA Group and Thales recently announced that a mix of 42 A330s and 17 A350s will be fitted with the entertainment and connectivity services. The A330 installs began late last year while the A350 fittings will commence in Q3 2018. The announcement lacks many specifics about which subsidiary aircraft will be fitted. Also, while the news of more and upgraded systems being installed is good there are many questions about the stability of HNA group at this time.

For the IFE/C systems the news is all good. Presumably the A350s taking the kit will be operating under the Hong Kong Airlines brand as that is the only HNA subsidiary with the type in its fleet. The A330s are harder to nail down but Hainan Airlines operates a couple dozen of the type while Beijing Capital Airlines has a few that fly long-haul service; that makes them strong contenders for the connectivity service.

“We are proud of our long-term successful relationship with HNA Group. The selection of Thales AVANT IFE and connectivity solutions is a testimony to our continued investment in the region. We look forward to partnering with HNA Group to develop innovative solutions that enrich the passenger experience.” – Dominique Giannoni, CEO, Thales InFlyt Experience

Thales notes in the announcement that the “Integration of Ka-band connectivity to the AVANT IFE system will provide a fully connected premium passenger experience.” While not outright stating the tie-up it seems clear that the Ka-band service implemented will be the Inmarsat Global Xpress (GX) solution. GX is the only global Ka-band offering available today and Thales’ relationship as a reseller of that solution has been in place for several years now.

HNA is everywhere (and possibly nowhere)

While there is no doubt that the Chinese market is large enough to support many players in the inflight connectivity market the relationship of HNA amongst all those vendors is an interesting one. Panasonic Avionics is the largest player in China, with service operating across multiple carriers and aircraft types. But it is not alone in servicing the market.

In March 2016 Gogo signed a deal with Shareco Technologies to fit 50 aircraft with Ku-band connectivity systems. Shareco is one of the HNA Group companies and the airlines named in that deal were Beijing Capital and Hainan. Before that deal took flight, however, Global Eagle announced a much larger joint venture plan with HNA Group. That JV had Gogo reconsider its plans. With only 50 potential aircraft to fit the value of moving forward was limited. Then the Global Eagle deal hit some troubles with the US Government ultimately deciding to nix the arrangement.

Now up on the merry-go-round of vendors working with HNA is Thales. And there is legitimate reason to question if Thales will ever really deliver the full complement of aircraft fittings promised and, if it does, whether it will be paid for the hardware and services rendered. In this scenario the issue is not that Thales cannot deliver the kit but rather the stability of HNA Group overall. The company is highly leveraged and cash flow amongst its various subsidiary companies is spectacularly opaque. Aircraft lease payments are late across several of the brands and the company continues to shuffle things around without any clear evidence of a substantive fix to the problems. In addition to the airline brands the HNA Group financial challenges also potentially affect airline ground handling companies Swissport and Gategroup, both owned by the HNA conglomerate.

And so a few dozen more aircraft may end up with new IFE/C services in partnership with Thales. Or they might be drastically changing their operations thanks to financial chaos. Or a mix of both. Stay tuned!