A Hong Kong Airlines A350 in Los Angeles. (Photo: AirlineGeeks | William Derrickson)

Hong Kong Airlines Facing New Lawsuit Over Leased Aircraft

The year 2019 came to a startling and difficult end for Hong Kong Airlines as a second airline leasing company sued the airline over delinquencies on a pair of aircraft.

Dublin-based Awas Leasing One filed a lawsuit in Hong Kong accusing the struggling airline of failing to pay over $2.9 million in rent on two Airbus aircraft as of December 29, the South China Morning Post reported. The lawsuit comes a few weeks after Alafco Irish Aircraft Leasing Sixteen filed a separate grievance over more than $34.5 million.

The newest lawsuit over the leases, which are rooted in an April 2016 deal between the two companies, sees the lessor seeking to recoup the missed payments and earn interest on the lost funds.

Continuing to fail to pay its creditors, Hong Kong Airlines is continuing to risk its future — both financial and operational — in its attempts to save itself from folding.

The carrier, which was founded in 2006 by Chinese conglomerate HNA Group, faced a titanic uphill battle in 2019 that threatened to see it become one of the many carriers to go belly-up over the course of the year. And it came close, coming dangerously close to losing its air operators certificate as a result of an ultimatum set by the territory’s Air Transport Licensing Authority to get funding to continue paying employees, contractors and creditors.

“After careful consideration of the financial position of [Hong Kong Airlines] at present, the ATLA must take immediate and resolute action to prevent further deterioration of [Hong Kong Airlines’s] situation in order to protect public interest,” a spokesperson for the regulator said at the time.

The carrier did, in fact, meet that deadline, widely suspected to having been propped up by a $560 million loan taken out in mainland China by principal investor HNA Group. But having turned cash flow negative long ago, the carrier has likely continued to burn through that money in an effort to keep operating as normal in the face of increased government scrutiny.

But as the two lawsuits have now become just the next hurdle the carrier will have to surmount, its propositions for survival look less and less likely as the days tick by, leaving creditors unpaid even as executives try to make all appear normal elsewhere.

The carrier is not likely to be helped by the political climate in Hong Kong, which has seen longtime hometown behemoth Cathay Pacific struggle to keep load factors up and outside carriers cancel service to and from the area as business travel has slowed and leisure travel has all but stopped.

And with that political climate unlikely to improve without any sort of landmark deal, Hong Kong will likely remain as un-lucrative a hub as it has been in recent months.

As a result, Hong Kong Airlines is all but out of options. If the carrier is unable to generate positive cash flows in the first months of 2020 and fails to pay those who are beginning to demand money from the airline, it will be a prime candidate to be the first victim of the ever-changing aviation industry of the 2020s.

Parker Davis
Parker Davis
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