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The U.S. online travel agency sector has been waiting for Chinese investors to begin throwing their money around stateside, as they have in the hotel industry, and China’s HNA Group indeed dipped its toes in the water in late 2015 but abruptly shut down the company it invested in a month ago.
HNA Group was the majority shareholder of San Francisco-based online travel agency startup Travana, which is now the subject of an involuntary bankruptcy petition [embedded below] filed by creditors last month in the city. Petitioning creditors, including some former employees, are seeking to collect on claims of some $870,000 but there are other alleged liabilities, including $24 million for the nine years remaining of a $225,000 monthly lease at Travana’s now-vacated offices in San Francisco, according to the petition.
Meanwhile, New York-based Fareportal, which operates the CheapOair brand, has filed several lawsuits against Travana and former Fareportal employees who went to work at the San Francisco company, alleging theft of intellectual property and other transgressions.
HNA, which has assets worth more than $100 billion with major holdings in Hainan Airlines, Hilton, Carlson Hotels, NH Hotel Group and many others, pledged to invest at least $50 million in Travana but opted to liquidate the business in March after having invested only $27.5 million, the petition alleges. The petition also states that virtually all of the roughly 70 employees were abruptly fired and given only health coverage for two weeks and no COBRA benefits.
“In sum, HNA committed to a long-term plan for the development of a new OTA [online travel agency],” the petition alleges. “Then, after the company had entered into a $30 million lease, hired employees (many of whom had to relocate to the Bay Area based on promises of stock options and being part of a fast-growing and fully-funded company), and spent months and many millions of dollars developing its technology and capabilities to the point that it was ready to support a full-service fully functional OTA, HNA abruptly shuttered the company, having funded only half of its committed investment.
“As a result of HNA’s actions, the management team, employees, minority stockholders, and creditors have been left completely in the lurch. HNA has offered no explanation for why this happened.”
A spokesperson for HNA Group declined to make any comment on the issue.
Travana buys Airfasttickets platform
The Travana saga begins in late 2015, according to the petition, when it acquired the tech platform of Greece-based Airfasttickets, which had gone bankrupt after conducting a huge radio-marketing campaign in the U.S.
HNA Group became the majority shareholder of Travana soon thereafter and the minority shareholders were a group of Taiwanese investors, including co-founder Jason Chen, who served as Travana CEO. The board, according to the petition, was controlled by HNA and Chen was the sole representative of minority shareholders on the board.
In August 2016, Travana announced its intent to launch a flight-and-hotel online travel agency based in San Francisco called Janbala.com. It was supposed to be a “mission-driven online travel agency” that would partner with charitable organizations presumably for marketing purposes.
Travana, according to the petition, also had deals with 11 metasearch outfits, including Kayak and FareCompare.
But, Travano’s demise began in earnest in February, according to the petition, when its HNA-appointed president and CFO, Shi Lei, met with HNA Group CEO Adam Tan, and unilaterally announced that Travana would be restructured.
CEO Chen, who was one of the minority shareholders, then wrote a whistleblower letter to the board and was terminated; the board around the same time decided to liquidate the company and terminate all but a few employees to handle the liquidation, the petition alleges.
No one is saying publicly why HNA Group would invest $27.5 million in Travana, which had a 10-year, $225,000-per month lease on its office space, and then abruptly decide to cease operations and liquidate the company a little more than a year later.
There is some talk that Travana’s CEO had little or no experience in online travel and that perhaps the company fell short on execution, although the petitioners argue that HNA’s actions “directly prevented” Travana “from meeting its business plan milestones.”
There is also speculation that the HNA Group decision might have something to do with with Chinese government policy to pull back on foreign investments that aren’t core to a company’s business, although others close to the situation dismiss that theory.
Was the decision based on anti-Trump sentiment, corruption allegations at HNA Group or even a power struggle within the notoriously opaque company that might cause the reversal of an earlier investment decision in Travana?
HNA Group isn’t commenting for now and hasn’t yet filed an answer to the involuntary bankruptcy petition.
The petitioners are asking the court to take immediate steps to secure Travana’s remaining funds, including $3.5 million in the bank; ensure a transparent process to sell Travana’s assets and block any attempt for the company to make preferential payments to creditors, and appoint an independent bankruptcy trustee
The bankruptcy court has scheduled a status hearing in San Francisco June 15.