HNA in talks with European carrier on possible acquisition

Plans to buy 35% stake in cargo operator Cargolux as part of global strategy

An unnamed official from HNA Group, the parent company of Hainan Airlines Co Ltd, said the group had initial contacts with European cargo airline Cargolux Airlines International SA regarding a possible acquisition.

Qatar Airways, Cargolux's second-largest shareholder, said earlier it plans to sell its 35 percent stake, and the HNA Group showed its interest in acquiring the stake, the 21st Century Business Herald reported on Friday.

HNA declined to comment.

Cargolux, based in Luxembourg, is one of Europe's largest scheduled all-cargo airlines with a global network.

The carrier, which has 17 Boeing 747 planes, lost $18 million in 2011, and its freight volume dropped 24,580 metric tons in 2011 compared with the previous year.

Qatar Airways bought the stake from the Luxembourg government in June 2011. Financial details were not released at the time.

Disagreements on the strategic orientation of the airline were the reason behind Qatar Airways' withdrawal, Reuters reported.

HNA Group's interest in the cargo carrier is in line with its overseas expansion strategy. Cargolux is not the group's first target in Europe.

In 2011, the group spent $25 million to buy a 49 percent stake in ACT Airlines INC, a Turkey-based cargo airline.

However, the investment may be risky, because of the downturn in the global cargo market, some experts said.

"I don't understand HNA's strategy to expand in the European cargo market at a time when the global cargo market is weak," said Zou Jianjun, a professor at the Civil Aviation Management Institute of China.

Global freight demand showed a "significant deterioration", according to the global traffic report for October, released on Thursday by the International Air Transport Association.

The report also showed that global freight demand in October was 3.5 percent below the previous year's level and declined 2.2 percent compared with September.

The IATA also forecast that the cargo market will see yields fall 1.5 percent in 2013.

"We don't know when the cargo market will recover and HNA will have to invest a lot of cash in the business, if they become a shareholder in the cargo carrier," said Chen Juan, an aviation industry analyst at Hua Chuang Securities in Guizhou province.