ExclusiveHong Kong Airlines in talks with Air China, others for strategic lifeline after earlier white knights balked at HNA Group’s price

Air China, the nation’s flag carrier, is among the parties in talks to begin due diligence on Hong Kong Airlines, according to sources familiar with the matter

An earlier consortium comprising Citic Group, Wuxi Communications Industry Group and the family of former Hong Kong Chief Secretary Henry Tang failed to make headway because of a disagreement over pricing

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Hong Kong Airlines was established in 2006. Photo: Roy Issa

Published: 6:30am, 9 Mar 2020Updated: 11:20am, 9 Mar 2020

Hong Kong Airlines Limited has turned to Air China and other parties for a strategic lifeline to reverse its financial woes, amid an impasse with a consortium of white knights after nearly nine months of fruitless negotiations, said three sources familiar with the matter.

Air China, the nation’s flag carrier and biggest international airline, is among the parties in talks to begin due diligence on Hong Kong Airlines, the sources said. An earlier takeover bid by Citic Group, Wuxi Communications Industry Group and the family of Hong Kong’s former chief secretary Henry Tang Ying-yen failed to make headway because of a disagreement over pricing, the sources said.

“Hong Kong Airlines is here to stay and committed to sustaining our long-term growth,” the airline said in response to a query by South China Morning Post, adding that as a private company, it does not disclose its financial activities, or comment on rumours and speculation. “We are always open to strong strategic investors.”

The emergence of several new white knights is the latest twist in the story of Hong Kong Airlines’ journey back to financial health, as the stricken carrier had to lay off 10 per cent of its staff and put its ground crew on a three-day work week to cut cost. The airline, which flies passengers and cargo to 48 destinations, has been operating on the brink of collapse for months, as Hong Kong’s anti-government protests, since June 2019, had deterred mainland Chinese travellers to the city.

Air China, the nation’s flag carrier and biggest international airline, is among the parties in talks to begin due diligence on Hong Kong Airlines. Photo: Shutterstock

Hong Kong Airlines, established in 2006, is 34 per cent owned by Frontier Investment Partner LP. HNA Group owns 29 per cent of the carrier, and former director Zhong Guosong has 27 per cent, while minority shareholders hold the remaining 10 per cent.