Troubled Hong Kong Airlines to axe Los Angeles service and cut operations by 6 per cent under government pressure

Financially troubled Hong Kong Airlines is cutting back its operations, including axing its Los Angeles-bound flights, under pressure from the Hong Kong government.

The city’s third largest airline, backed by the indebted Chinese conglomerate HNA Group, said it would cut the number of flights by 6 per cent, or around 20, per week including cancelling the Los Angeles route from February 8 next year.

It also said it would continue to make changes on flights to Vancouver, Osaka, Okinawa, Sapporo, Tokyo Narita, Seoul, Haikou, Hangzhou, Nanjing and Bangkok.

With Hong Kong rocked by anti-government protests for almost five months, the airline has seen its financial condition worsen as the social unrest intensified.

Affected passengers would be offered alternative arrangements to minimise disruptions to travel plans, especially during the upcoming holiday seasons, the airline said.

The Transport and Housing Bureau said the carrier’s financial situation was a concern.

“After reviewing the financial improvement plans and financial information recently submitted by HKA, the bureau is of the view that HKA’s financial situation has not improved, and that the situation is a matter of concern,” it said in a statement released on Monday afternoon.

Last week, the Air Licensing Transport Authority – a statutory body with the power to shut down carriers and approve new ones – warned it would impose measures if the airline’s financial situation did not improve.

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The bureau, in conjunction with the Civil Aviation Department, concluded that it needed to take measures following a meeting with the airline’s management team on November 1.

The government statement acknowledged the airline’s consolidation of flights.

“It is hoped that this will help improve the operation of Hong Kong Airlines. The government also requires Hong Kong Airlines to make appropriate arrangements to cater for the interests of passengers and staff,” it said.

The authorities said they would continue to closely monitor the financial situation and “consider further actions as appropriate”.

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The airline operates around 330 passenger flights a week and is the single biggest competitor to Cathay Pacific Group, which controls the city’s three other carriers.

Hong Kong Airlines, founded in 2006, flies to 30 destinations, predominantly in North Asia but also in Southeast Asia and North America. The carrier currently operates 34 aircraft.

The privately held airline has been under intense scrutiny in recent weeks with the government’s air licensing body dissatisfied that the company’s financial situation has not improved since late last year.

Since August, senior executives have taken a 20 per cent pay cut, employees have been placed on no-pay leave for up to four days a month and the company has trimmed its flight schedules on an ad hoc basis.

The company acknowledged in a statement on Monday that its efforts to make changes were not enough, forcing it to cut deeper as stipulated by authorities.

“Hong Kong Airlines has been operating in a challenging business environment for some time. In addition to strong competition and overcapacity in the market, the recurring protests in Hong Kong since June have also affected travel demand, further impacting its business and revenue,” the company said.

In late August, the full extent of the airline’s problems became clear as it warned of a severe cash-flow problem after protests prompted thousands of customers to cancel trips and fewer made advance bookings.

Hong Kong Airlines has been under government scrutiny since last December and in the first half of 2019 was subject to regular public statements, in which authorities urged improvements in its finances.