Hong Kong Airlines Meets Government Deadline, Tries to Begin Turnaround
The government of Hong Kong on Monday presented struggling carrier Hong Kong Airlines with an ultimatum: Find the money to pay its employees by Dec. 7 or risk having its operating license suspended or even revoked. The next day, the airline’s chief executive officer released a statement vowing to take all necessary action to avoid laying off employees.
Later the same day, according to the South China Morning Post, a Shanghai Stock Exchange filing revealed the carrier’s biggest stakeholder had secured a loan of 4.4 billion HKD ($560 million). The loan coming just days before the government’s deadline.
That investor, HNA Group, holds stakes in at least 11 airlines around the country and has its hands in dozens of other companies through multiple investment platforms. It is widely believed, however, that the group is struggling as some of its investments are beginning to go belly-up, not entirely unlike Hong Kong Airlines.
On Wednesday, Hong Kong Airlines Chairman Hou Wei released a statement saying the airline would be receiving a cash injection that would be sufficient to keep it running under the terms set by the government, the South China Morning Post reported. He did not make any indication, however, as to how long the money would allow the airline to operate or whether the airline would require more in the future.
“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,” Hou in a letter to the airline’s employees obtained by the Post.
How exactly the airline plans to move forward is unclear, but officials at the company remain hopeful that the infusion of cash could be the jumpstart the airline needs to kick its operations back to an economically viable level in the long term.
Hong Kong Airlines’ recent—and also well-documented—struggles have made it just the next airline in a list of many to face turbulence in operations in the past couple years. A whole host of airlines, from WOW air to Thomas Cook in Europe to Jet Airways and numerous others in Asia, a seemingly high number of airlines has seen their time come in 2019, even after a similar year in 2018.
In Hong Kong, the carrier itself has faced steep competition, among other issues, with Cathay Pacific cornering the premium market and its subsidiary Cathay Dragon attempting to capture a lower-cost customer. Hong Kong Airlines’ mission to play the disruptor abounded with hurdles from the start due to fierce competitors.
Further still, the political unrest that has plagued Hong Kong itself for weeks has seen business travel and tourism alike plummet as many are hesitant to travel to the city. Not only have the changes led foreign airlines to scale back service to the cosmopolitan hub, but hometown carriers have been hit particularly hard.
Though the airline has received the money it needs to operate for the time being, there are still fundamental flaws that need to be addressed before Hong Kong Airlines can again stand as a viable airline for years to come.
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