Hong Kong Airlines says it has acquired enough cash to pay its staff as it battles to keep its licence to fly

Danny Lee

Hong Kong Airlines on Wednesday said it had drawn up an “initial cash injection plan” that would allow it to pay remaining staff their overdue salaries by Thursday, according to an internal memo from company chairman Hou Wei.

“Following urgent consultations, an initial cash injection plan has been drawn up. Outstanding salary to staff will be paid on 5 December 2019 and our services will gradually resume to normal as soon as the funds arrive,” said Hou in a letter to staff.

Hong Kong’s third largest airline was on Monday given five days to find substantial – and unspecified – amounts of new capital to keep the business afloat, as its cash in hand fell to a level that put its licence in jeopardy, said the Air Transport Licencing Authority (ATLA).

The body had earlier delivered an ultimatum to the airline to find new cash or investors before Saturday, or face its licence being suspended or even terminated.

Hong Kong Airlines staff at a check-in counter at Hong Kong International Airport. Photo: Nora Tam

Hou acknowledged the new licencing conditions by the Hong Kong authorities and stressed that shareholders and management “attach great importance to this matter”, implying that it was still working on finding the substantive cash.

HNA Group, the controlling shareholder of Hong Kong Airlines, declined to comment on whether a HK$4.4-billion loan it obtained from a range of Chinese state-owned banks on Monday would go to the stricken carrier.

Hong Kong Airlines boss vows to do everything to avoid laying off staff

In the short term, Hong Kong Airlines is said to be determined to keep flying over the upcoming peak Christmas travel period, with hundreds of thousands of bookings on the line, sources say.

The airline declined to say where the money came from, and did not want to be drawn on HNA.

Regarding the financing plan, a Hong Kong Airlines spokeswoman said: “Our operation is still running normally and we remain committed to flying our passengers to their destinations safely.”

Hou acknowledged “some of our services are already restricted or affected” due to the weak travel demand and declining revenue.

The airline had been consolidating, including adjusting its portfolio of routes and flying fewer planes, the chairman said.

“Moving forward, we will continue to drive consolidation and strengthen our internal structure to improve revenue,” Hou said.

Hong Kong Airlines in crisis talks as existence hangs in balance

The ATLA said in a statement that it had not heard from the airline by Wednesday afternoon.

“So far, the Air Transport Licensing Authority has not received any response from the Hong Kong Airlines Limited regarding the two new conditions attached to its licence by ATLA on December 2, 2019,” a spokeswoman said.

The failure of Hong Kong Airlines to raise new capital would likely lead to its closure, which would make it the second local carrier to go out of business, after the 2008 collapse of Oasis Hong Kong.

Scores of airlines, mostly in Europe, have collapsed in recent years and the pace of failures increased in 2019 with the demise of Britain’s Thomas Cook and Iceland’s Wow Air.

After more than 12 months of warning signs for the crisis-hit carrier, Hong Kong Airlines’ financial fragility was exposed during the ongoing civil unrest in Hong Kong, which has led to fewer travellers and ticket bookings.

In November, the airline admitted it could not pay approximately 45 per cent of its staff, and had cut its in-flight entertainment because it could not afford to pay the vendor.

Hong Kong Airlines has also said it would withdraw from all long-haul flying by February next year and continue to shrink its regional flights. More planes are expected to be withdrawn from service.

The 13-year-old airline currently flies to 32 destinations, mostly in North Asia and Southeast Asia, and a quarter of its 39 planes are grounded. It is the only local competitor to the dominant Cathay Pacific Group, which has control of three passenger carriers in the territory.

The Staffs and Workers Union of Hong Kong Civil Airlines urged the government to think about the 3,500 jobs at risk before they decided on the ailing carrier’s future by Saturday.

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