Just last week Hongkong Airlines sounded positive that their financial situation has improved after a cash injection and that the carrier would keep operating but not the airport authority has impounded seven of their jets.
Really strange and worrisome signals from the cash strapped carrier that certainly doesn’t help to regain confidence of the customers.
South China Morning Post reported a few hours ago that the aircraft are now impounded.
Seven aircraft under cash-strapped Hong Kong Airlines that have been idling at Hong Kong International Airport have been impounded by a major creditor in one of the first moves to protect financial interests, the Post has learned.
In a statement on Monday, the Airport Authority Hong Kong (AAHK) confirmed it had invoked section 40 of the Airport Authority Ordinance to take control of planes under the airline. The section deals with the detention of aircraft.
“The AAHK has acted … to detain seven idle aircraft of Hong Kong Airlines in order to protect financial interests,” the authority said. …
The airline, acknowledging the latest move, said its operations remained normal.
“Due to network consolidation, some of our aircraft have not been scheduled for operation and are currently suspended from service under the Airport Authority’s arrangement. Our current operation remains normal,” a Hong Kong Airlines spokeswoman said.
The aircraft, which have been stored, have not flown for three to 11 months. According to industry data, most of the planes affected are owned by the airline or a leasing company linked to its controlling shareholder, mainland China’s HNA Group.
“AAHK’s detention action will help protect the financial interests of both AAHK and the government,” the Civil Aviation Department said, in response to the action taken by the authority, a statutory body.
The authority charges airlines for every 15 minutes they park an aircraft at Hong Kong’s airport. The charges run into millions for those left for weeks and months. The airline had stored seven planes, ranging from 56 to 318 days, as of Sunday, meaning they had been racking up fees owed to the authority.
According to a calculation by the Post for the seven aircraft, the time parked amounted to 1,220 days or 29,280 hours. The airport charges from HK$94 (US$12.05) per 15 minutes in the cheapest parking area, including the maintenance apron, to HK$147 in remote parking stands.
Based on the two sets of fees, Hong Kong Airlines owes between HK$11 million and HK$17.2 million. …
Separately, the Post has seen a letter, dated December 12, from the authority to Director General of Civil Aviation Simon Li Tin-chui which said section 40 of the ordinance was used as a result of the default in payment of charges by Hong Kong Airlines.
Two planes affected were Airbus A350s, registered B-LGE and B-LGH, which were leased from Kuwaiti firm ALAFCO, whose Irish subsidiary on December 10 pursued Hong Kong Airlines in the High Court for HK$364 million (US$46.7 million) in unpaid rent on aircraft. One of the planes, which had been grounded since October 20, resumed flying on December 14.
Obviously the carrier knew for a long time that these fees are due but until recently they didn’t even have enough cash to pay their staff on time. And even after receiving a cash injection from their parent company HNA paying their bills to the local airport authority wasn’t their top priority.
Of course it depends on how much money they actually got from HNA. If these planes aren’t used anyway then just having them impounded instead of squandering valuable cash reserves might make at least sense in a limited way. Is Hongkong Airlines even expecting to last much longer?
Apparently these aircraft haven’t been in use for quite some time. Just sitting somewhere on the tarmac, collecting dust and incurring fees. This carousel won’t be spinning forever. Even after receiving fresh money from HNA the only purpose Hongkong Airlines actually serves is being a furnace for the cash. They continue to be unprofitable and highly costly the longer they keep flying.
Booking tickets on Hongkong Airlines is truly a gamble and potential customers should be very careful prepaying tickets beyond a certain point. Let’s see what happens once the Christmas and new year holidays are over which is traditionally a very busy travel season. The game could be over very soon, the authorities have already threatened once to take HK Airlines license away and imposed tough conditions.