There's an old joke: How do you build a US$100 million airline? Start off with a US$1 billion airline.

Under founding Chairman Chen Feng, HNA Group Co. appears to have gone in the opposite direction. From its first flight in 1993, through a US$25 million investment from George Soros in 1995 and a 2000 restructuring, the former Hainan Airlines has never stopped growing.

Jumbo Jet

In December last year, gross assets of the aviation-focused conglomerate already amounted to 468.7 billion yuan (US$67 billion) - more than any U.S. carrier, and greater than the combined assets of Europe's market leaders Deutsche Lufthansa AG and International Consolidated Airlines Group SA. Then in 2016, things really got going.On Jan. 8, it completed its then-biggest acquisition, the US$2.5 billion takeover of Irish aircraft lessor Avolon Holdings Ltd.. A month later, it paid US$6 billion for Ingram Micro Inc., the world's biggest electronics distributor, and completed the US$2.8 billion purchase of ground cargo handling company Swissport Group. In October, HNA paid US$10 billion for another lessor, CIT Commercial Air, and spent US$6.5 billion on a quarter of the Hilton Worldwide Holdings Inc. hotel chain.

Big Deal

Throw in smaller deals and the tally for 2016 should put gross asset value easily over US$100 billion. That would be enough, were the closely held HNA listed, to make it one of the world's 100 biggest non-financial companies - larger than Boeing Co., Walt Disney Co. or Coca-Cola Co.The growth could serve as a parable about what a business can achieve with sufficient cheap capital and good political connections. Chen, a puckish graduate of Harvard Business School and Lufthansa's flight school, should hope it doesn't end up looking more like a cautionary tale.No company becomes one of the world's most acquisitive without some seriously good finance, and HNA appears able to borrow more cheaply than the U.S. government. Based on the prospectus for HNA Group Co.'s 1.5 billion yuan in three-year 6.2 percent bonds announced in July, the company made 247 million yuan of interest payments during 2015 -- equivalent to less than 0.1 percent of its 264 billion yuan average debt. Its cash holdings earned a higher rate, with a 0.5 percent return.

That's given Chen a free hand to expand away from the perennially unprofitable airline business into the bits of aviation where money is actually made. HNA is now the world's third-largest aircraft lessor, the biggest ground-handling business and the leader for in-air catering. It owns airports, cargo businesses and travel agencies, not to mention hotels in more than 100 countries and stakes in online travel-booking site Tuniu and China's version of Airbnb.

Falling to Earth

Those moves have proved well timed. A glut of capacity among Hainan Airlines' competitors has caused a sharp drop in prices over the past year, with its own tickets now barely more costly than those for Juneyao Airlines Co., an upmarket budget carrier. But air transport made up barely a fifth of HNA's revenue in 2015, according to the July prospectus, so that's probably survivable.The bigger question is whether the nexus of government policy, cheap capital and strategic ambition that's fueled HNA's expansion continues to play out in the year ahead.

Flight to Quality

Should the M&A cash continue to flow, Chen might look to bulk up in freight forwarding: Deutsche Post AG and Deutsche Bahn AG are both reported to have looked at raising capital over the past year through sales of DHL and DB Schenker, two of the world's largest logistics businesses.Computer reservation systems are another possible target: Sabre Corp., which manages bookings for carriers including American Airlines Group Inc., Southwest Airlines Co. and Virgin America Inc. and provides hotel bookings to HNA itself, traded last month at its lowest valuation since a 2014 listing. Amadeus IT Group SA would be an even bigger prize, although its EUR18.9 billion (US$19.7 billion) market capitalization may be too big even for Chen.Still, there's a potent reason not to bulk up in reservations. Such a move risks setting up HNA in competition with state-owned China TravelSky Holding Co., which provides the same service to domestic carriers.The son of a middle-ranking Communist Party official who's been a delegate to China's legislature, Chen has prospered over the years by always keeping on the right side of the government. He's pointedly linked HNA's overseas expansion with former President Jiang Zemin's "go out" policy and made Xi Jinping's "Chinese dream" slogan a core of the group's mission statement.

That's wise. Regardless of how cleanly they run their businesses, high-profile corporate leaders in China have to be alert to the risk of having their wings clipped by jealous officials.Anbang Insurance Group Co. was blocked from taking over Starwood Hotels and Resorts Worldwide Inc. by China's insurance regulator, and steel-to-property conglomerate Fosun International Ltd. promised to rein in its acquisitive ways after co-founder Guo Guangchang briefly disappeared last year to assist in a government investigation.

Stuck on the Tarmac

Like Fosun and Anbang, HNA has grown mighty on a combination of lenient finance and ravening pursuit of overseas acquisitions. But those cheap borrowing costs have left it flabby in financial terms: Interest cover is generally in the region of 1.5 times, according to HNA's bond prospectus, a level that's usually considered a danger zone. Returns on invested capital barely break 1 percent.HNA has been a powerful vehicle for China Inc.'s global ambitions, carving out a space in the aviation sector to match billionaire Wang Jianlin's Dalian Wanda Group Co., which has turned itself into a linchpin of the entertainment industry. But it's only got there thanks to the goodwill of some very generous lenders. Should the bill ever come due, how is Chen ever going to pay it?