UPDATE 1-HNA Group says it is in a "state of war", will work to resolve liquidity risks

(Adds quotes from Gu, background)

BEIJING, March 10 (Reuters) - China’s HNA Group will work to increase cashflow and resolve liquidity difficulties as business operations resume, its newly appointed executive chairman said on Tuesday as the firm battles with the fallout from the coronavirus outbreak.

The cash-strapped conglomerate will treat creditors and capital markets with honesty and respect, and will not hide from any issues, Gu Gang told an internal meeting, according to a post on the company’s official WeChat account.

They are the first remarks from Gu who assumed the role of heading a government-backed working group dedicated to addressing HNA’s liquidity risks at the end of February, after the company asked the local government for help.

“Work in the previous stage, due to concerted efforts from company cadres, has achieved some positive results. We have got a handle on things and given confidence to all parties,” said Gu, although he added that the company was still in a state of war in its efforts to tackle financial risks.

HNA directly owns or holds stakes in a number of local Chinese carriers, including Hainan Airlines, and is among many companies pressured by the coronavirus outbreak that has forced widespread flight cancellations.

Airlines in China have cancelled tens of thousands of flights since the start of the outbreak, but have started resuming them in recent weeks as the spread of the virus slowed in mainland China.

The country’s aviation regulator is aiding the effort by offering support to airlines that have restored or kept services amid the epidemic, including doling out cash subsidies for each flight and waiving airport and air control fees.

Hainan Airlines, for example, could be due at least 50 million yuan ($7.20 million) as of March 3, data from aviation data provider Variflight showed.

HNA Group was once one of China’s most aggressive deal-makers, spending $50 billion in a global acquisition spree that saw it take stakes in big names such as Deutsche Bank AG and Hilton Worldwide Holdings Inc.

It began selling many of its purchases two years ago to focus on its airlines and tourism businesses after its massive spending drew scrutiny from China’s central government and other overseas regulators.

$1 = 6.9477 Chinese yuan renminbi Reporting by Stella Qiu and Brenda Goh, editing by Louise Heavens, Kirsten Donovan