Hong Kong Airlines (HX, Hong Kong Int'l) must bolster its financial standing by December 7 or risk the loss or suspension of its Air Operator's Licence (AOL), the special administrative region's Air Transport Licensing Authority (ATLA) said in a statement on December 2.

Together with Hong Kong’s Transport and Housing Board (THB) and Civil Aviation Department (CAD), the authority met the management of the carrier, which is controlled by cash-strapped Chinese conglomerate HNA Group, on November 27 and expressed “grave dissatisfaction and deep concern” over the carrier’s financial position.

“In light of the ongoing financial problems of Hong Kong Airlines Limited (HKA), ATLA has been closely monitoring the financial situation of the airline over a long period of time. [...] Since December 2018, ATLA has issued six press releases to inform the public of the financial problems of HKA and the follow-up work of ATLA,” it said.

“Having considered the latest financial position of HKA, ATLA was of the view that HKA's financial position has deteriorated rapidly to such an extent that has severely impacted on HKA's capability in meeting its obligations as an employer to pay salary and the probability of providing a satisfactory service under its licence in respect of continuity and regularity of operation. ATLA found the situation extremely worrying.”

As previously reported, Hong Kong Airlines admitted in an internal note dated November 28 that it had been forced to delay payment of November salaries to almost half of its employees given a scaling back in capacity.

A spokesman for ATLA said in the December 2 statement: “After careful consideration of the financial position of HKA at present, ATLA must take immediate and resolute action to prevent further deterioration of its situation in order to protect public interests. [...] HKA must, by a deadline set, ensure a cash injection at a level determined by ATLA (or provide an alternative to the satisfaction of ATLA), and raise and maintain its cash and cash equivalent level as stipulated by ATLA.”

The statement concluded that “if HKA fails to improve its financial situation as required by ATLA by the deadline, ATLA will take further action under Regulation 15E of the Regulations, which provides for the revocation or suspension of the licence. ATLA would announce its decision by December 7, 2019.”

The THB and CAD confirmed in separate statements issued within 30 minutes of ATLA's that they concurred with the licensing authority's demands for a cash injection and raising its cash levels. The CAD said it had enhanced monitoring of the airline's flight operations and aviation safety since mid-December 2018 and had “conducted about 180 scheduled and unscheduled checks on HKA” over the last 12 months.

The company is not publicly listed and does not release financial data, but in April it told shareholders that it needed at least HKD2 billion Hong Kong dollars (USD255 million) in fresh funds or it would lose its AOL. It added that it had lost HKD3 billion (USD383 million) in 2018.

Hong Kong Airlines said in a statement on December 2 that it acknowledged the ATLA's new requirements, adding that “our operation is still running normally and we remain committed to flying our passengers to their destinations safely.”

It also said: “We have addressed our financial situation by implementing cost-saving measures, while adjusting our operation from time to time to respond to changing market demand. As weak travel demand resulting from the social unrest in Hong Kong has continued to affect our business and revenue, Hong Kong Airlines has reduced its capacity and flights in the coming months as well as further consolidated its network under the challenging business environment.”

Editorial Comment: Added Hong Kong Airlines statement. - 02.12.2019 - 12:56 UTC