Leasing firm files suit to wind up HK Airlines

PUBLISHED : Wednesday, 08 December, 2010, 12:00am
UPDATED : Wednesday, 08 December, 2010, 12:00am

Team Cignus, a wholly owned subsidiary of Tokyo-listed NEC Capital Solutions, filed a petition in the High Court to wind up Hong Kong Airlines.

According to a directors' report for the year ended March, Team Cignus, an Irish-registered company, leased an aircraft to Hainan Airlines, which then subleased it to Hong Kong Airlines.

Hainan Airlines controls Hong Kong Airlines.

The aircraft is a Boeing 737-800 that was delivered in December 2006.

As of March 31, Team Cignus was owed US$1.55 million by Hainan Airlines, the directors' report said. Hong Kong Airlines subsequently provided Team Cignus with a plan to settle outstanding rentals worth US$1.8 million and default interest. On July 2, the company received US$400,000, according to the report, dated July 21.

Although Hainan Airlines, the mainland's fourth-largest airline, is the contractual lessor, it is Hong Kong Airlines that has been making the lease payments.

The company was continuing to monitor both airlines' operational and financial conditions when the report was issued.

It noted that the value of the receivable balance would be dependent on the financial strength of Hainan Airlines, and that a default by that airline or Hong Kong Airlines could affect their cash flows and earnings.

At the time of the report, the directors believed it would be possible to recover the sum.

NEC Capital Solutions, a financial services provider, declined to comment, citing court proceedings.

Hong Kong Airlines could not be reached for comment.

The petition, filed on Monday, comes just as Hong Kong Airlines plans to raise HK$5 billion in a share float in Hong Kong, a move that the company's president, Yang Jianhong, recently said was intended to fund aircraft acquisition to expand its fleet beyond 40 aircraft by 2012.

Hong Kong Airlines operates more than 30 routes from Hong Kong. It has ordered 33 wide-bodied aircraft from Airbus.

The planned purchase was expected to cost more than US$6 billion, Yang said.