The HNA logo is seen on a building in Beijing on Feb 18, 2016. (GREG BAKER / AFP)

BEIJING/SHANGHAI (Reuters) - China plans to take over HNA Group Co and sell off its airline assets as the coronavirus outbreak has hit the conglomerate’s ability to meet financial obligations, Bloomberg reported on Wednesday, citing people familiar with the matter.

The government of Hainan, the southern province where HNA is based, is in talks to take control of the group, the report said. HNA directly controls or holds stakes in a number of local carriers, including its flagship Hainan Airlines.

HNA did not immediately respond to requests for comment on the Bloomberg report.

Under the plan, China would sell the bulk of HNA’s airline assets to the country’s three biggest carriers - Air China Ltd, China Southern Airlines Co and China Eastern Airlines Corp, the report said.

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The heavily indebted conglomerate has restructured jet orders with Europe’s Airbus in a compromise deal that includes an order for dozens of A330neo jets, two people familiar with the matter have told Reuters.

It began unwinding many of its acquisitions to shift its focus to its core airlines and tourism businesses after it racked up high levels of debt from its shopping spree, drawing regulatory scrutiny

HNA Group was once one of China’s most aggressive dealmaking firms, spending US$50 billion on acquisitions that included stakes in Deutsche Bank and Hilton Worldwide, and prime property in New York, Sydney and San Francisco.

It began unwinding many of its acquisitions to shift its focus to its core airlines and tourism businesses after it racked up high levels of debt from its shopping spree, drawing regulatory scrutiny.

But the prices HNA has sought and the complex structures and loans and other business links that bind its holdings have made unwinding its investments difficult, bankers said.

In December, its chairman Chen Feng said the firm had delayed some salary payments in 2019 due to cash flow shortages, but vowed to resolve liquidity risks in 2020.

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However, the airline industry has come under pressure this year with the coronavirus outbreak prompting airlines to cancel thousands of flights, adding to woes for the sector as it also battles weak demand due to slowing global economy.

Hainan Airlines and others have tried to cut their losses by putting foreign pilots on unpaid leave, Reuters has reported. Hong Kong Airlines, also part-owned by HNA, has said it will cut 400 jobs.

China’s aviation regulator acknowledged the industry’s pains last week, and said it would support restructurings or mergers to help airlines cope with the epidemic.