HK Airlines given five days to surviveTop News | Avery Chen and Agencies 3 Dec 2019
Embattled Hong Kong Airlines, controlled by cash-strapped Chinese conglomerate HNA Group, might lose its license on Saturday if it fails to improve its financial situation, the Air Transport Licensing Authority warned.
The aviation regulator said it found the financial position of Hong Kong Airlines "extremely worrying" after meeting senior management of the airline and hearing representations and explanations from them last Friday.
The authority believes that Hong Kong Airlines' financial position has deteriorated rapidly, requiring the company to meet two new license conditions by December 7. They are ensuring a cash injection at a determined level, and raising and maintaining its cash and cash equivalent level as stipulated by the authority.
If the carrier fails to improve its financial situation by the deadline, the authority will revoke or suspend its license, the aviation regulator said in a statement. The final decision will be announced within five days.
The Civil Aviation Department and Transport and Housing Bureau have both demanded the company work to improve its finances. Chan Fan, the Secretary for Transport and Housing, said the authority has planned for special circumstances.
Hong Kong Airlines last week said it would not be able to pay November salaries to local employees as scheduled and canceled more long-haul flights, such as Vancouver, after recording a significant drop in revenue.
On Saturday, the carrier said on its website that its inflight entertainment system would be out of service until further notice. The company said yesterday it is communicating with shareholders and stakeholders to meet the new requirements from the licensing authority, adding its business is operating normally.
"As weak travel demand resulting from the social unrest in Hong Kong has continued to affect our business and revenue, Hong Kong Airlines has reduced its capacity and flights in the coming months as well as further consolidated its network under the challenging business environment," Hong Kong Airlines said in its statement.
As the anti-government protests entered the sixth month, visitor numbers to Hong Kong plunged by 43.7 percent year-on-year to 3.31 million in October, data from the Hong Kong Tourism Board showed.
Passenger numbers at Hong Kong International Airport fell by 13 percent while flight movements declined by 6.1 percent last month, the Airport Authority said.
Hong Kong Airlines was struggling financially before the protests.
More than half of board members in the company resigned after HNA Group co-chairman Wang Jian died on July 3, 2018, during a business trip to France.
The carrier incurred a net loss of HK$917 million for 2018, and operating profit slumped 91.5 percent year-on-year to HK$112 million, according to financial information provided by Hong Kong Airlines to bond investors in July. Its current liabilities, meanwhile, surged 69.3 percent year-on-year to HK$18.4 billion.
The airline in April told shareholders it needed at least HK$2 billion in fresh funds or it would lose its operating license.
Local media reported yesterday the airline has less than HK$150 million in cash, citing sources.
Henry Tang Ying-yen, former chief secretary for administration, denied rumors that his family - together with two state-owned companies, CITIC Group and Wuxi Communications Industry Group - would acquire the airline by injecting at least 2 billion yuan (HK$2.2 billion) cash.
If Hong Kong Airlines closes down, it will become the second local airline to fail - budget long-haul carrier Oasis Hong Kong wound up in 2008.
Even Cathay Pacific Airways, the largest airline in the city, has not been immune to the unrest in Hong Kong.
The carrier issued its second profit warning in less than a month in November, and it has frozen headcount and reduced passenger capacity for the winter season due to weaker demand.
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