Hong Kong Airlines was in turmoil on Wednesday after an apparent boardroom coup in which a former director claimed he had taken control due to financial irregularities on the part of shareholder HNA Group.
Zhong Guosong proclaimed himself chairman of Hong Kong’s third largest carrier just a day before supposed chief Hou Wei assured staff in a memo that he was still at the helm of the financially fragile company.
Hou on Wednesday said a “shareholder dispute” was in process but it was nevertheless business as usual. However, two statements on behalf of Zhong from global business advisory firm FTI Consulting rubbished that claim.
It was not clear who was officially in charge but neither side appeared to be backing down, as the carrier fights for its future amid financial instability.
FTI late on Wednesday cited “new majority shareholders” Hong Kong Airlines Consultation Service (HKACS) and Frontier Investment Partners (FIP) as saying Zhong had “immediately assumed legal control”. The faction is one of two linked to indebted Chinese conglomerate HNA who are apparently fighting to take the reins.
“These steps were taken to secure the financial future of Hong Kong Airlines and stop further related party transactions,” HKACS and FIP said in the statement.
Zhong was cited as saying Hong Kong Airlines had launched an investigation into the financial handling of the HNA Group parties.
He was also quoted as saying "HNA Group representatives have since regrettably sought to obstruct this investigation through a number of desperate measures" and through improper means.
HNA did not respond to comments by press time.
FTI asked that its statement be attributed to the airline itself, but the in-house public relations team said the consulting firm did not speak for the carrier.
An earlier FTI statement said Zhong had received the backing of two majority shareholders at an extraordinary general meeting on Tuesday. It was not known who attended the meeting or who voted for what.
A source familiar with the matter said that within the past 24 hours, FIP had been sold, implying that control of its share in the airline was no longer in the hands of Zhong.
The in-house PR team were on Wednesday not aware of the latest developments, and on the company website the management team was unchanged. Hou’s memo to staff still referred to him as chairman.
“I will continue to work hand in hand with our leadership team to take concrete action to secure Hong Kong Airlines’ future. We will also keep you updated on the company’s current situation accordingly,” Hou wrote.
The Hong Kong government’s Transport and Housing Bureau and the city’s airline licensing body said they had sought clarification on the reported changes. The authorities said they had only received “a simple notification” that boardroom changes were under way.
The confusion follows an extraordinary couple of days for the airline as the loss-making company tries to turn the business around and raise billions to stay afloat.
The licensing body has ordered the company to produce a fifth financial plan after querying four other restructuring schemes since December.
The firm reported losses last year of HK$3 billion (US$382 million), and the management recently appealed to shareholders to come up with HK$2 billion to help it retain its flying permit.
Zhong holds 27 per cent of the airline, and FIP, a Chinese private equity firm, controls 34 per cent. HNA has a 29 per cent stake. The partners are represented by HKACS, which is directed by Zhong and FIP executives.
More than a dozen representatives of Zhong were seen outside the company’s headquarters dressed in black suits on Tuesday after having entered the offices to enforce the message about the leadership change.
Zhong last month opposed the sale of sister airline HK Express, in which he has a 48.6 per cent stake, to hometown rival Cathay Pacific Airways for HK$4.97 billion.
Tuesday’s press release by HKACS and FIP said: “A resolution was passed at an extraordinary general meeting on April 16 to appoint new directors of Hong Kong Airlines, including Mr Zhong Guosong as chairman who, working with the existing senior management team, shall take control of the immediate management and operation of the company.”
The changes had been “taken with the full backing of majority shareholders”, it said.
“This revitalised team will work on a plan to secure the financial future of the company,” HKACS said in a separate statement.
Hong Kong Airlines on Wednesday declined to comment on corporate matters when contacted by the Post. It said it was business as usual.
In a joint statement, the Transport and Housing Bureau, the Civil Aviation Department and the Air Transport Licensing Authority said: “The airline concerned [Hong Kong Airlines] has been requested to ensure that aviation safety and operations would not be affected by its internal shareholders’ dispute.”
More from South China Morning Post:
- Embattled Hong Kong Airlines could be set to cut its fleet by more than a quarter to help resolve financial woes
- Leadership shake-up at troubled Hong Kong Airlines lands former director Zhong Guosong in control with a Chinese private equity partner
- More than 100 employees have left troubled Hong Kong Airlines in past three months but carrier insists few departures were through compulsory job cuts
This article ‘Financial irregularities’ cited as reason for apparent boardroom coup at Hong Kong Airlines first appeared on South China Morning Post