Troubled Hong Kong Airlines threatens to sue anyone starting ‘untrue and groundless’ rumours about its financial health
- Carrier slams suggestions that it will stop flying and be liquidated
- Warning comes after insurer announces it will alter its travel policies with regard to airline
Hong Kong’s third biggest airline has threatened to sue anyone making “untrue and groundless speculations” that it is going bust.
Hong Kong Airlines issued a statement on Saturday slamming suggestions that the carrier would stop flying and be liquidated. The legal threats came despite concerns about the health of the business which prompted the authorities to question the company.
Talk of legal action was a warning shot in response to insurer Blue Cross, which on Thursday announced it would alter its travel policies and claims made against the carrier should it go bankrupt. Typically, clients would normally be given up to HK$2,000 (US$256) in compensation in the event an airline folded.
“We deplore the untrue and groundless speculations about Hong Kong Airlines ceasing operation and applying for liquidation. We reserve the right to take legal action against those who deliberately create these rumours,” the company said in its statement.
It has repeatedly stressed that it is business as normal for the airline and staff but developments have piled on the bad news, shaking consumer confidence in the carrier.
Hong Kong Airlines is one of two local carriers controlled by the debt-burdened Chinese conglomerate HNA Group. The other is budget airline Hong Kong Express.
After a worldwide spending spree based on borrowed money, HNA had to sell assets after becoming overloaded with debt which prompted close scrutiny from the central government.
Should Hong Kong Airlines collapse, it would mark the biggest failure linked to HNA.
The troubled airline has seen several directors quit since last summer and its top management team has been given a shake up. Its chief financial officer also left, with no replacement announced.
Before Christmas, Hong Kong’s Air Transport Licensing Authority, which has the power to shut down carriers and approve new ones, ordered the airline to explain its financial situation.
Piling on the problems, HNA on Monday sued a firm owned by a former director of Hong Kong Airlines, for about HK$854 million in unpaid debt. The company facing the lawsuit, Hong Kong Airlines Consultation Service, shared the same business address as its namesake carrier. But the airline denied links with the firm.
Local media also reported that the airline must repay HK$4.5 billion in bonds by January 20, a task believed to be challenging for the carrier.
Beset by financial concerns, the airline entered a “slowdown”, delaying delivery of several new aircraft, pausing the launch of new long-haul routes to London and New York and cutting the number of flights to existing destinations.
The airline, the city’s challenger to Cathay Pacific Airways, operates a fleet of 38 passenger aircraft and three cargo planes. It flies to 36 passenger destinations and has eight routes for freighter flights. The company employs 3,900 staff.