Air China (CA, Beijing Capital) is among the parties reported being in talks over investing in Hong Kong Airlines (HX, Hong Kong Int'l), three sources familiar with the matter have told the South China Morning Post.

An earlier consortium comprising the family of Hong Kong’s former chief secretary Henry Tang, China’s Citic Group, and Wuxi Communications Industry Group, the Chinese owner of the Dornier Seawings amphibious aircraft maker, pulled out after a disagreement over pricing.

In July 2019, this consortium had expressed a willingness to inject at least CNY2 billion yuan (USD291 million at the time) in fresh capital into the struggling carrier and assume part of its debt. It came very close to a deal but walked out after months of fruitless negotiations, the sources said.

Last week, after the China Development Bank was included in a committee led by the government of China’s Hainan province and the Civil Aviation Administration of China (CAAC) to help HNA Group manage its debts; more parties were brought to the table to discuss the carrier.

As it continues to sell off assets, HNA Group’s disposal of Hong Kong Airlines is now awaiting a decision by its risk management committee on the overall strategy for the group as a whole, the sources explained, adding that the China Development Bank was still said to favour the Wuxi deal.

A change in shareholding at Hong Kong Airlines exceeding 10% would require approval by the city’s government. As it stands, the company is 34% owned by Frontier Investment Partner LP, and 29% by HNA Group, while former director Zhong Guosong has a 27% stake and minority shareholders have the remaining 10%.

Air China already owns 29.9% of Cathay Pacific (CX, Hong Kong Int'l), making it the latter’s second-biggest shareholder after the Hong Kong- and London-based conglomerate Swire Pacific Group with 45%. Air China declined to comment to the South China Morning Post.

“Hong Kong Airlines is here to stay and committed to sustaining our long-term growth,” a Hong Kong Airlines spokesperson told the newspaper. “We are always open to strong strategic investors.”