Hanging by a Thread: Hong Kong Airlines lives another year

By Ankur Deo | December 14, 2019

2019 has been a tumultuous year for global low cost carriers, having witnessed the demise of multiple airlines, with the likes of Wow Air, Thomas Cook, and Jet Airways, among others, having called it a day. Additionally, numerous airlines have been struggling to meet ends, namely, Norwegian, Air India, South African and now, the Hong Kong Airlines (HKA), the third largest airline based out of Hong Kong.

Being backed by the Chinese conglomerate ‘HNA Group’, HKA has been under government scrutiny since December 2018 for its slumping financial performance. In October this year, the Hong Kong Air Transport Licensing Authority (ATLA), a statutory body with the power to approve and shut down carriers, asked the airline to take immediate and concrete steps to improve its financial situation or risk losing its license. On December 2, 2019, the ATLA set the below conditions to HKA:

  1. HKA must ensure cash injection at a level determined by ATLA (or provide an alternative to the satisfaction of ATLA) by Saturday December 7
  2. Raise and maintain its cash and cash equivalent level as stipulated by ATLA

However, the airline has managed to satisfy the ATLA and temporarily stay out of trouble after the HNA Group secured a 3-year bank loan of four billion yuan ($568m) from eight Chinese banks, as reported by Shanghai Stock Exchange. The report stated that this cash infusion shall be used for aviation fuel, aircraft supplies and materials, take-off and landing fees, staff salaries and aircraft leasing fees. While the airline has managed to stay afloat for now, the ATLA has made it clear that it shall be closely monitoring the financial performance of HKA over the long run.

“ATLA will continue to closely monitor the overall operation of HKA and will ask the airline to continue to improve its operational efficiency and modify its long-term operational strategy. ATLA will take appropriate actions in light of the circumstances as necessary,” the report said.

It looks as if HKA has managed to avoid the fate of the other airlines above in 2019. However, ‘Is this avoidance, or mere deferment?’ is a question that only time will answer. For now, Hong Kong Airlines will indeed live for another year to tell its story! What do you think, will the airline manage to stay afloat, thanks to the cash infusion, or will the deteriorating economic circumstances in Hong Kong contribute in creating more adversities?

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