Hong Kong Airlines has been on the brink of going out of business for a while now, as the airline has been unable to pay staff, has had to shut off inflight entertainment, and has had to axe routes and return planes.
Earlier this week the airline was given a critical deadline by the Air Transport Licensing Authority of Hong Kong. They had looked into Hong Kong Airlines’ finances, and had determined that they “deteriorated rapidly,” to the point that they no longer meet the minimum standards to have a permit.
The airline was informed that they had until Saturday (tomorrow) to find new investors or more cash, or else their license could be suspended or revoked.
While the details are limited at this point, it looks like Hong Kong Airlines has received some sort of a cash injection, allowing them to pay staff and continue operations. As the airline said in a statement:
“All of our stakeholders, including shareholders and management, attach great importance to this matter. Following urgent consultations, an initial cash injection plan has been drawn up. Outstanding salary to staff will be paid on 5 December 2019 and our services will gradually resume to normal as soon as the funds arrive.”
As of now the airline hasn’t revealed much else. We don’t know what part is behind this cash injection, and we don’t know if it’s a significant cash injection (in the hundreds of millions of dollars) that will allow them to operate for months to come, or if this is a short term cash injection that will allow them to pay employees.
Earlier this week a filing with the Shanghai Stock Exchange showed that HNA Group (the parent company of Hong Kong Airlines) had received a four billion CNY (roughly 568 million USD) loan from several Chinese banks.
The money was to be used for fuel, salaries, aircraft lease fees, takeoff and landing fees, and more. What wasn’t clear was whether this was intended for Hong Kong Airlines, or for one of HNA Group’s other struggling airlines.
Ultimately I’m happy to see that jobs are being preserved for now, and that people (both employees and passengers) won’t be impacted by an airline going out of business right before the holidays.
However, I don’t necessarily think this secures Hong Kong Airlines’ future. The airline is still dealing with a very challenging business environment, and even during good times in Hong Kong, the company’s prospects of survival have been questionable.
4 Billion loan is just going to equal more debt if the HNA group in general can't get their cash flow in the right direction.
As for HNA's international partners, I can see them start to look elsewhere. VA for example may had possibly looked at putting forward the axing of the MEL-HKG route had HX gone broke sooner.
I flew with Hong Kong airlines in June last time and when we were descending into the Hong Kong airport the landing was creepy, you could feel the plane dropping several times as if we were going down a staircase, I've flown dozens of times in many places and different types of aircraft and had never felt a landing that strange, it startled everyone in the cabin, we were in an A330 coming in from Beijing.
@Hannah
I wouldn't risk HX flights unless they were like $100.
Do you think it's wise to book a flight with HK airlines for a trip next weekend?
That “ four billion CNY“ is designated for Hong Kong Airlines only, can’t use on any other HNA company. Apparently, they think HX is way more important to HNA.
@david - it has always been so. Hong Kong Airlines was initially called "China Rich Airlines" and was purchased by HNA in 2006, whereafter it changes the name to Hong Kong Airlines. It is a Chinese airline all along.
guess they're chinese owned now. RIP
There are rumours that in order to make the balance sheets of HNA look good, Hong Kong Airlines (which isn’t listed) has been used as the scrape goat of HNA’s debts. Either way, it is a much larger problem than just the issue of Hong Kong Airlines...
Is this a shot across the bow for Cathay Pacific? Hong Kong Airlines is by no means a complete direct competitor with Cathay, but their collapse would most certainly benefit CX if it were to happen.
With CX's supposedly lax position on the protests and such - and their tenuous relationship with the mainland - is the orchestrated funding of HX this a way for China to keep the pressure on CX? After all,...
Is this a shot across the bow for Cathay Pacific? Hong Kong Airlines is by no means a complete direct competitor with Cathay, but their collapse would most certainly benefit CX if it were to happen.
With CX's supposedly lax position on the protests and such - and their tenuous relationship with the mainland - is the orchestrated funding of HX this a way for China to keep the pressure on CX? After all, with the protests going on for so long it would look pretty bad on the mainland for the HNA-owned airline to falter, while Cathay - with it's strong Hong Kong identity - to survive.