Hong Kong Airlines (HX, Hong Kong Int'l) has been hit with a “penalty” for tapping government wage subsidies but failing to pass on all of the funds to its employees, a representative of the embattled airline confirmed to the South China Morning Post.

The Hong Kong Airlines Concern Group, made up of cabin crew made redundant in December, had filed a complaint against the company to the authorities, alleging discrepancies between the HKD154.3 million Hong Kong dollars (USD19.9 million) the airline had received through the territory’s Employment Support Scheme (ESS) and the amounts provided to staff.

The discrepancies related explicitly to its headcount for a second three-month period the scheme was in action for, from September to November 2020, which was 2,940 employees at the time, and the headcount provided to the government.

Soon after the term for the subsidy concluded, Hong Kong Airlines laid off 250 cabin crew blaming the worsening situation facing passenger aviation. According to the ch-aviation fleets advanced module, six of the airline’s fleet of 30 aircraft are currently active, with just a handful of flights operating per week.

“After the redundancies in December, we found out that HKA used the same headcount to apply for the first and second rounds of ESS. Some of our colleagues had taken no-pay leave during the second ESS period, so we suspected HKA may have broken the rules,” the group recounted to the newspaper.

The rules of the Covid-19-alleviating scheme stated that workers on unpaid leave should not be included in the headcounts provided.

Hong Kong Airlines, whose workforce now stands at 2,300, told the daily that it had “addressed the headcount difference in the first tranche of ESS application with the authorities. The penalty has already been deducted from the second tranche of ESS funding that we received from the government.”

The ESS Secretariat confirmed in a reply to the concern group that the carrier had breached the scheme’s rules and would be fined and told to repay the amount not passed on to staff.

In related news, Caixin Global reported on February 2 that Hong Kong Airlines may soon once again face the risk of losing its licence due to financial concerns, a year after gaining a reprieve from Hong Kong regulators.

In December 2019, after weeks of deliberation, the territory’s Civil Aviation Department, Transport and Housing Bureau, and Air Transport Licensing Authority said that Hong Kong Airlines had met their technical and financial benchmarks to warrant its continued operation. However, now that the Hainan High People’s Court has initiated bankruptcy proceedings against its main shareholder, HNA Group, Hong Kong Airlines has again been thrown into crisis, according to the report.

A government-appointed working group expects some 500 companies linked to the troubled conglomerate to enter into bankruptcy restructuring, sources told Caixin. Hong Kong Airlines is not among an initial batch of about 60 HNA-linked companies and their subsidiaries facing court applications to force them into restructuring, whose total debts reportedly account for 60% of all HNA-related debts.

But the Air Transport Licensing Authority has been monitoring the airline’s financial situation and will “take appropriate action in accordance with the laws and regulations” if it no longer feels the carrier can continue to operate and meet obligations, the authority told the business news outlet.

Hong Kong Airlines was not immediately available for comment.