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UNCLAS GUANGZHOU 032163 
 
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E.O. 12958: N/A 
TAGS: EAIR ECON ETRD CH
SUBJECT: Hainan Airlines Plans Expansion and Name Change 
 
(U) This cable is sensitive but unclassified and may contain 
business sensitive information.  Not for internet distribution. 
Please handle accordingly. 
 
¶1. (SBU) SUMMARY:  Hainan Airlines (HNA) Chairman Chen Feng told 
the Consul General that HNA plans to begin direct cargo flights to 
Boston in early 2007, followed by passenger flights later that 
year.  Chen also said that HNA will change its name to "Grand 
China Air," and will invest an additional USD 2 billion in 
operating capital.  This represents a significant opportunity for 
U.S. aircraft manufacturers and service companies, but Chen 
clearly wants to be wooed with frequent senior-level visits to 
HNA.  Chen's management practices promote a service-oriented 
corporate culture that blends service industry best-practices with 
Eastern philosophy.  END SUMMARY. 
 
¶2. (SBU) HNA plans to begin direct cargo flights from Beijing or 
Shanghai to Boston in early 2007.  Direct passenger flights along 
the same route would likely follow in mid to late 2007.  Chen 
noted that flights to the United States are almost always fully 
booked, but lack similar return capacity; he said that routes need 
at least 40% return capacity in order to earn a profit. 
 
¶3. (SBU) Chen discussed his plans to rename Hainan airlines "Grand 
China Air."  With additional operating capital of USD 2 billion, 
the airline would expand its domestic and international services 
and establish itself as more than just a southern China regional 
airline. 
 
¶4. (SBU) HNA is the biggest buyer of aircraft in China, according 
to Chen.  The creation of Grand China Air and expansion of 
services would be a significant opportunity for U.S. aircraft 
manufacturers and service companies.  But to fully take advantage 
of this commercial opportunity, U.S. aircraft manufacturing 
representatives must - likely as a sign of respect but also to 
show that they are in the market for the long run in terms of 
service - increase the frequency of their senior representatives' 
visits to South China.  Chen lamented that senior Boeing officials 
had not visited HNA for 10 years.  While HNA will continue to 
balance aircraft purchases between Airbus and Boeing, Chen clearly 
prefers a balance in favor of Boeing. 
 
¶6. (SBU) Chen stated that HNA currently flies 600 routes with 
approximately 3200 flights per week.  His management philosophy 
centers on a service-oriented corporate culture that blends 
industry best-practices with Eastern philosophy.  HNA's 30,000 
employees are required to learn the company's philosophy.  HNA's 
managers must even submit their personal thoughts (hand-written) 
about the company philosophy each month.  Chen compared his 
company to a school where the employees learn how to spend their 
lives. 
 
¶7. (SBU) BIO NOTES: Chen is a Tibetan Buddhist and speaks English 
well.  He is a self-taught English speaker, who recognized the 
value of the language as a young employee with China's civil 
aviation administration.  Chen is an open, friendly, and animated 
interlocutor, preferring a casual, rapid fire, and at times 
startlingly frank, exchange of opinions.  During his initial 
meeting with the Consul General, Chen dressed in unadorned 
traditional white Buddhist clothing.  Chen's wife, son, and 
grandson live in the United States, where he owns a home.  His son 
works as an investment banker for the Soros Group in New York. 
 
GOLDBERG