Troubled Hong Kong Airlines gets lifeline again from authorities for more time to present fifth finance plan, as it vows to keep flights going over Easter
- Licensing authority demands ‘further clarifications’ and ‘concrete plan’ after fourth meeting
- With reported losses last year of HK$3 billion, fate of company has been laid bare
The government has thrown Hong Kong Airlines another lifeline with more time to come up with a coherent restructuring plan, as the indebted carrier pledged to keep flights running during the busy Easter period amid mounting concerns over its finances.
Hong Kong’s third largest airline made the reassurance, despite repeatedly failing to pay banks, aircraft-leasing companies and suppliers on time, while authorities questioned its turnaround plan drawn for the fourth time since December.
With reported losses last year of HK$3 billion (US$382 million) and company bosses appealing to shareholders to inject HK$2 billion just to keep its flying permit and the business afloat, the fate of the airline has been laid bare.
In 2008 the government moved to stop fledgling low-cost long-haul carrier Oasis Hong Kong from flying after it racked up HK$1 billion in debts.
Over 100 employees have left troubled Hong Kong Airlines in past three months
The Air Transport Licensing Authority (ATLA) – an arms-length government agency that has the power to shut down carriers deemed mismanaged – issued a late night statement on Monday asking Hong Kong Airlines to provide yet more “clarifications” on plans to improve finances.
The authority said on March 15 that the carrier, backed by Chinese conglomerate HNA Group, needed to produce a “concrete plan” to improve its books. But after reviewing the airline’s latest plan on Monday night, the body of nine appointed members expressed doubts again.
After the meeting, the group concluded Hong Kong Airlines had to “provide further clarifications as to how [it can improve its] financial situation shortly”.
The authority said the next step would be to review further details to be submitted by the carrier, leaving the door open to “take appropriate actions … when necessary”.
It also noted: “Hong Kong Airlines assured ATLA that it would ensure smooth operation of air services, especially during the coming travelling peaks of the Easter and Labour Day holidays”.
In a statement, the carrier said: “Hong Kong Airlines will continue to cooperate with ATLA to provide updates on our operation and submit our financial improvement plan as requested.”
Hong Kong Airlines will continue to cooperate with ATLA to provide updates on our operation and submit our financial improvement plan as requested
A company spokesman added that the airline was still working with aircraft lessors and other service providers on debt repayment plans.
Hong Kong Airlines said it “remains committed” to offering “the best service” to customers over the upcoming holidays, without referring to the specific commitments offered to the government about the operations.
The embattled carrier has yet to repay in full debts owed to AerCap, one of the largest aircraft-leasing companies in the world, and Wilmington Trust, which sued the airline in late February for HK$150 million after it fell behind on payments for rented planes.
Embattled Hong Kong Airlines could be set to cut its fleet by more than a quarter
The carrier made a “partial repayment”, according to ATLA, which had demanded updates on the progress “until the claims have been settled completely”.
Hong Kong Airlines’ troubles came to light when concerns emerged that it could not repay a US$550 million bond. This came with the exodus of top brass, including its chief financial officer.
The controversy deepened when an insurer in January said it would not pay out premiums if the company went bankrupt. The government had also considered making a contingency plan during an earlier peak season holiday period over Lunar New Year in case the airline went bust at the time.
The company has also been saddled with several lawsuits over unpaid debts to investors, banks and other creditors in recent months.
Routes, particularly long-haul ones, have been cut to stem losses and the airline has also trimmed its fleet. The Post reported on Sunday that Hong Kong Airlines’ headcount has dropped by more than 100 to 3,798 staff over the past three months as it endured the prolonged cash crunch.
HNA, the indebted airline-to-financial services conglomerate with the greatest influence over Hong Kong Airlines, is in the midst of unwinding a US$50 billion binge on foreign spending in recent years.
The group agreed to sell its other Hong Kong carrier, budget airline HK Express, to rival Cathay Pacific Airways in a HK$4.98 billion deal last month. Efforts to sell Hong Kong Airlines, which is the only commercial airline in the city not controlled by Cathay, to a number of suitors have so far been unsuccessful.
