Hong Kong Airlines: government allows stricken carrier to continue flying after cash found to plug finances

Danny Lee

The government has decided against punishing Hong Kong Airlines (HKA) further over its financial black hole after management secured funding that stopped the beleaguered carrier from losing its licence to operate.

With more than 3,500 jobs on the line and hundreds of thousands of bookings at risk ahead of Christmas, staff and customers could breathe a sigh of relief at Saturday’s announcement of the reprieve.

The Air Transport Licensing Authority (ATLA) said it was satisfied the carrier had met two new licence conditions, which forced it to find significant new funding. However, the authority said it remained concerned about the carrier’s weak financial situation.

The future of thousands of jobs at Hong Kong Airlines has been hanging in the balance. Photo: Bloomberg

The first condition imposed on the airline was a requirement to raise substantial capital by its Saturday deadline. The second was to maintain and improve its cash balances as instructed by the ATLA.

“ATLA has decided not to take further action against HKA for the time being, pending the airline’s submission of further details regarding condition one,” the authority said in a statement on Saturday.

The licensing body, which authorises airlines to carry passengers, said it came to that decision after reviewing information submitted by the airline on how it had raised cash to the levels required.

The ATLA said it gave “careful consideration” based on serving the public interest and maintaining Hong Kong’s role as an international aviation hub.

Hong Kong’s third-biggest airline would continue to be closely scrutinised, city authorities said, as the government warned it would not rule out further action in the future, including forcing the struggling carrier to cut back on flights and routes.

The ATLA said it would “take appropriate actions in light of the circumstances as necessary”.

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Vowing it was “here to stay”, HKA said it would comply with the ATLA’s requirements and that the rescue money would be injected into the airline “by phases”.

“We will continue to serve all our passengers over the upcoming holiday season and beyond,” an airline spokeswoman said.

“Moving forward, we will continue to drive consolidation and strengthen our internal structure to operate more efficiently and improve our revenue.”

Hong Kong Airlines said after the reprieve that it is ‘here to stay’. Photo: Winson Wong

The Post understands HKA was given a guarantee for substantial fresh investment, but had not received the money by Saturday.

Neither the ATLA nor HKA had commented on the source of the cash or how much was raised.

The Civil Aviation Department said it also had no plans to take further action in relation to HKA’s air operator’s certificate, which allows an airline to operate a plane for commercial purposes.

Last Monday, the ATLA said the airline’s financial situation had “deteriorated rapidly” as it could not pay its staff on time, while concern was mounting that its money troubles could impact on its ability to operate flights, in breach of its licence.

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Losing its ATLA-issued licence, which grants permission from the Hong Kong government to carry passengers and cargo, would ground flights and force it out of business.

Despite raising extra capital, the airline needs to radically restructure.

The Transport and Housing Bureau warned HKA not to waste the reprieve it had been given as it urged the carrier to take tough decisions to plug its financial black hole.

Hundreds of thousands of bookings with Hong Kong Airlines were in jeopardy when the airline was just days away from losing its licence. Photo: Edward Wong

In 2018, the company reportedly lost HK$3 billion. For the years 2013-2015, the airline made a cumulative profit of HK$1.4 billion, according to the airline’s bond documents.

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Last week, it was unable to pay almost half of its staff, including pilots and office workers.

Long-haul flights from February have also been axed, ending a heavily loss-making foray, while it continues to shrink the number of routes and planes it flies.

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