Hong Kong Airlines May Fold By Saturday

Sebastian wrote last week (read more here) that the financial condition of Hong Kong Airlines had significantly deteriorated, and the airline had even delayed wage payments.

The airline may fold this week as the Air Transport Licensing Authority (ATLA) will either suspend or revoke its license on Saturday (December 7) unless more funding is raised.

You can access the Hong Kong Airlines website here.

Here’s an excerpt from the Reuters (access their piece here):

The airline is not publicly listed and does not disclose financial data, but in April, it told shareholders that it needed at least HK$2 billion ($256 million) in fresh funds or it would lose its operating license.

The carrier told them at the time it had lost HK$3 billion in 2018 and an infusion was crucial, according to people present.

Hong Kong’s Transport and Housing Board said in a separate statement on Monday it met with the airline on Nov. 27 and expressed “grave dissatisfaction and deep concern” that the carrier’s financial position had not improved.

Here’s an excerpt from Bloomberg (access their article here):

The Air Transport Licensing Authority told the carrier that its finances had deteriorated so much that it needs to raise more cash or risk losing its license. The regulator will make a decision by Saturday, it said.

Though Hong Kong Airlines, backed by Chinese conglomerate HNA Group Co., doesn’t disclose its financials because it isn’t listed, the company has acknowledged it’s facing difficulties. On Friday, it said that protests have “severely affected” its business. The airline was already under strain as economic growth took a hit from the U.S.-China trade war, and facing scrutiny from authorities, who’ve been requesting updates and improvements on its financial situation this year.

Here’s an excerpt from the SCMP (access their article here):

Chinese state-owned banks have given the owners of failing Hong Kong Airlines a HK$4.4 billion loan, the group said in a filing to the Shanghai Stock Exchange late on Monday.

HNA Group had earlier obtained the 4 billion yuan cash injection, and said the money would be used for aviation fuel, aircraft expenditure, operational expenses from flying, salaries and financing costs for HNA Holdings and its affiliated airlines.

There are about two dozen aviation companies in the HNA Group, including its flagship carrier Hainan Airlines. Also on Monday, the heavily indebted group signed an agreement to restructure its low-cost carrier West Air, giving Chongqing Yufu Asset Management Group and its affiliates a 70 per cent stake.

Conclusion

HNA, equally troubled parent of Hong Kong Airlines that is prepped up by the Chinese government to keep it solvent, received a $568 million loan on Monday to keep its airline business alive. It is unclear, however, if any of these funds will find their way to Hong Kong.

Unless Hong Kong Airlines can raise funds by Saturday, the operations will likely fold on that day when the license is revoked or suspended.

HNA sold its HK Express, a Hong Kong-based low-cost airline, to Cathay Pacific earlier this year. The business environment in Hong Kong has deteriorated significantly this year due to protest, and the number of incoming tourists halved. This has affected the load factors of airlines operating to and from Hong Kong.

It is not ideal if Hong Kong is left with just one airline Cathay Pacific.

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