Will Hong Kong Airlines stay or go?

By Ankur Deo | December 18, 2019

And here we go again, Hong Kong Airlines(HKA) is in the news! The besieged airlines has had its seven aircraft seized by Hong Kong International Airport Authority after failing to make payments related to parking slots and airport services. In our recent article titled: ‘Hanging by a Thread: Hong Kong Airlines lives another year’, we had our doubts whether HKA can hold up even after its parent company, the ‘HNA Group’ arranged money by taking loan worth HK$4.4b to keep the airline afloat; little did we know that HKA would make the answer so conspicuous!

Reports stated that HKA could owe between HK$11m(USD1.4m) to HK$17.2m (USD2.18m) to the Airport authorities. The action was taken in accordance to the ‘Airport Authority Ordinance’, in which a section of rules that addresses overdue charges also allows the authority to sell the seized planes if HKA does not pay the charges within 60 days of the detention of aircraft.

HKA has been struggling for over an year now, how much more can it sustain? Image Credits:

To understand how the troubles began for HKA, let’s go back a year in time. In November 2018, a number of senior executives of the carrier stepped down, including the vice-chairman Tang King Shing and co-chairman Zhang Kui. At the same period, media reports also stated that the airline was struggling to meet its near-time financial mandates. A couple months later, the Air Transport Licensing Authority (ATLA) stepped in and asked the airline to explain their financial status, and this is where things went from bad to worse. In February 2019, HKA was sued by two firms for defaulting on aircraft rentals, worth almost HK$150m (USD19.2m). For the coming months, the airline continued negotiations with ATLA which did nothing good for HKA, and come June 2019, local unrest hit the region, leading to cancellation of multitude of flights, and substantial decrease of tourists and business travellers to and from the country. After closely averting its license being suspended earlier this month, things looked a tad bit optimistic for HKA after the airline was granted a mammoth HK$4.4b loan. However, not even that aid seems to have eased the situation!

This seizure certainly raises deep concerns about the airline’s future.

“Typically, aircraft being seized is a prelude to operations being shut down for an airline”, said Paul Yong, an analyst at DBS Group Holdings Ltd. in Singapore.

Bottomline, if you have plans to book a ticket on HKA, we would certainly ask you to give a second thought! While we enjoy Christmas and New Year, we are a bit skeptical about the mood in the offices of HKA.

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