Is Hongkong Airlines On The Verge Of Going Under? Routes Cut & Staff Payments Delayed!

Hongkong Airlines is causing worry this weekend as news broke the carrier now has difficulties paying it’s staff and is also cutting a lot of routes including all long haul flights.

Hong Kong’s aviation authority is monitoring the situation and already hinted at regulatory action which could include a mandatory restructuring or revoking the carriers operating license.

Hong Kong’s economy has been hit hard by the ongoing pro-democracy protests in the city and one of the areas most affected was the aviation industry. While Cathay Pacific reported losses Hongkong Airlines seems to be on life support.

As Bloomberg News reported yesterday the carrier has not only cut all long haul routes out of their future schedule but now can’t afford to pay it’s Hong Kong based ground staff.

Hong Kong Airlines Ltd. is delaying salaries as protests have “severely affected” the city’s third-biggest carrier, whose finances were already under strain before anti-government demonstrations flared in June.

Only cabin crew and overseas employees will receive their November wages on time, while all other Hong Kong-based workers will be paid on Dec. 6, the closely-held airline said in an email Friday. It said revenue dipped significantly in November — a low travel season — and impacted the monthly payroll.

Authorities have been concerned about Hong Kong Airlines for months, regularly requesting updates on its financial situation. Representatives from the Transport and Housing Bureau and Civil Aviation Department met with the airline’s management on Nov. 1 and demanded the company worked to improve its financial position. The Air Transport Licensing Authority, which has the power to revoke flying rights, has also expressed concern about the airline.

“ATLA is of the view that HKA’s financial situation has shown no sign of improvement,” the licensing body said last month, warning that it would “consider taking appropriate action” if no progress was made.

Hong Kong Airlines cut some operations earlier this month and plans to cancel Los Angeles-bound flights from February. Other airlines have been affected by the unrest too. Cathay Pacific Airways Ltd. is one of the most high-profile business casualties, issuing profit warnings and coming under fire from the Chinese government as well as protesters. …

“This one-off salary arrangement does not impact our daily operation,” Hong Kong Airlines said. “Our staff remains professional and are committed to delivering a safe and smooth service to all our customers.”

Hongkong Airlines has many mainland China routes and it was established in 2006 as a member of the HNA Group. Hongkong Airlines is also integrated in the Fortune Wings Club, the frequent flyer program primarily operated by HNA Hainan Air.

While a one week salary payment delay doesn’t sound like much it’s indeed a worrying sign if a company if that size can’t afford to pay their workforce on time. It also puts the employees who have bills to pay in a difficult position.

Even more worrisome for the airline is that such a situation creates rumors that spread like wildfire through the industry. As soon as an airline is showing signs of not being solvent anymore suppliers demand upfront or in some instances cash payment to deliver their goods and services. Most often it’s the fuel delivery that breaks a weak airlines neck.

Likewise customers are refraining from purchasing new tickets which slows down the cash flow dramatically. In the current situation I myself would watch and see what happened rather than buying tickets far out. And if you have to buy tickets then make sure to pay with a credit card and protect yourself against a possible insolvency.

Conclusion

The next 4-8 weeks will be crucial for the carrier. If it can’t prove to the authorities, suppliers and customers that the company is in a stable position the end could come very abruptly and we have seen a good number of carriers going out of business in recent years. In this case it could be either the regulators or the suppliers that cuts the carrier off and seals it’s fate.

To be fair the carrier already had profitability problems before the Hong Kong protests started affecting the local economy. They had some good offers even in Business Class but never seemed to be able to make the “package” work. Flights within Asia on Hongkong Airlines were and are often very very cheap.

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