Hong Kong Airlines, under the Chinese HNA Group, must overcome its financial position by December 7 or risk the suspension or loss of its operating licence.
Hong Kong’s Transport and Housing Board met with the city’s second-largest airline on November 27 and expressed grave dissatisfaction and deep concern that the carrier’s financial position had not improved. HNA Group has been under pressure from China to divest itself of assets and pay down debt. It had racked up over $100 billion USD in borrowing as it went on a global acquisitions spree. However it has lacked cash to invest in its businesses and some of them have found it difficult to make interest payments or even, like Hong Kong Airlines, to pay employees and fuel.
Hong Kong regulators have been inspecting Hong Kong Airlines for safety every couple of days given its financial struggles and finally gave them only a few days to come up with cash or risk having the government shut them down.
It is believed Chinese state banks have extended a $568 million USD loan to HNA Group who will use it to pay staff salaries, aircraft leases, fuel, airport charges and other costs at its affiliated airlines. However it is not confirmed that the funds will be used for those purposes at Hong Kong Airlines as they own other airlines including Hainan Airlines as well.
HNA sold its HK Express, a Hong Kong-based low-cost airline, to Cathay Pacific earlier this year. The business environment in Hong Kong has deteriorated significantly this year due to protest, and the number of incoming tourists halved. This has affected the load factors of airlines operating to and from Hong Kong.