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HNA Apologizes as Debt Dispute Strands Chinese Cruise Passengers

Cruise Ship Henna
Chinese cruise tourists, who have been stranded in Jeju island for three days, disembark from Henna, HNA's international cruise ship, to get on a plane prepared by the company to return home on Sept. 15, 2013 afternoon. Photographer: Kim Ho-chun/Yonhap

Sept. 16 (Bloomberg) -- HNA Group, owner of China’s fourth-largest airline, issued a public apology after a $58 million debt dispute left more than 2,300 passengers and crew on its cruise ship stranded on a South Korean island.

HNA Tourism Cruise and Yacht Management Co., the unit that operates the cruise, posted the apology “for the inconvenience the incident has caused” on its official microblog today. The company said it’s already organized seven chartered flights that have brought 1,409 of the cruise ship’s 1,659 Chinese passengers back to China from Jeju Island, a popular destination for tourists from the country, located off the southern coast of South Korea.

HNA Tourism also “strongly protested” the actions of South Korean authorities, saying business disputes can’t be allowed to jeopardize the interests of tourists. The number of Chinese tourists visiting South Korea may reach 4.5 million this year, with HNA Tourism’s cruises bringing 29,000, it said.

A court in Jeju detained the ship, set to sail for the city of Incheon Sept. 13, after receiving a seizure application from a unit of Jiangsu Shagang Group Co., the official Xinhua News Agency reported. Shagang has been seeking $58 million for unpaid charter fees and ship broker commissions, the Legal Daily newspaper reported yesterday.

The Chinese ambassador to South Korea made representations immediately “to protect the legitimate rights and interests of the Chinese nationals,” Chinese foreign ministry spokesman Hong Lei said at a regular briefing in Beijing today.

Chinese Tourists

The ship, named the Henna, was to leave the island today after the local court finished processing the related paper work, an official with the Jeju government’s ocean development department, who asked not to be identified because of government rules, said by telephone today. Only about 100 of the tourists from the ship are still on Jeju, the official said.

China overtook Germany and the U.S. last year to become the world’s biggest source of tourists, with its citizens increasing the number of outbound trips by 18 percent in 2012, according to the Beijing-based China Tourism Academy.

HNA will compensate each of the cruise’s passengers about 2,000 yuan ($327) or give them a free ticket aboard the Henna within one year, the company said in a statement. The company said in its statement that the Jeju court had no jurisdiction to detain the ship.

Unpaid Fees

Shagang, based in the eastern Chinese city of Zhangjiagang, has been in a legal battle in the U.K. seeking payment of the charter fees and ship broker commissions from Grand China Shipping Hong Kong and its guarantor HNA Group, according to the Legal Daily report. An official at Shagang’s legal department, who asked not to be identified because of company policy, confirmed the details of the Legal Daily report and declined further comment.

Grand China Shipping Hong Kong is currently in the process of winding up in Hong Kong and HNA Group has no equity stake in the company, HNA Group said in an e-mailed statement. The court case in the U.K. is ongoing and will determine if HNA Group should pay as a guarantor, Wen Jiang, vice president at HNA Group’s shipping unit Grand China Logistics Holding (Group) Co., said at a briefing in Shanghai today.

HNA Group, parent of Hainan Airlines Co., has businesses that span retail, tourism, property and shipping. The Grand China Logistics unit was late on lease payments to about 10 shipowners in 2011.

To contact the reporter on this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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