Haikou, China, headquartered Hong Kong Airlines owner, the HNA Group has secured a $568 million loan from state-owned banks. This latest news comes fast in the footsteps of the Hong Kong authorities telling the airline that it needed to boost its finances by Saturday or face the possibility of having its operating license suspended.

What irked the attention of the authorities more than anything was when the airline said it would not be able to pay its staff's November salaries until the 6th of December.

Hong Kong Airlines remains committed to its customers

It appears that HNA secured the $568 million loan on behalf of HKA. The airline has said it will use the money to pay wages, airport charges, fuel and aircraft lease payments.

All this talk of having their operator’s license suspended has spooked the public into thinking that the airline could be on the brink of going out of business.

The airline responded to rumors by saying that it continues to operate as normal and that it is dedicated to flying passengers to their destinations safely.

In a bid to reassure the public that it was business as normal Hong Kong Airlines released a statement on its website which read:

“Hong Kong Airlines acknowledged the new requirements set out by the Air Transport Licensing Authority (ATLA) today. Our operation is still running normally and we remain committed to flying our passengers to their destinations safely.

“Hong Kong Airlines updates ATLA and the Transport and Housing Bureau (THB) regularly on our operation and financial improvement plan. 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.

“Hong Kong Airlines is actively communicating with our shareholders and other stakeholders to meet the new requirements from ATLA as requested. We will remain professional and deliver our best customer service to all passengers.”

In an effort to cut costs, Hong Kong Airlines has announced that it will be cutting several routes from its network, including all flights to North America, starting in February 2020.

The ATLA has told HKA they need to maintain a certain cash level

The body that oversees airlines in Hong Kong, the Air Transport Licensing Authority, laid down two conditions Hong Kong Airlines needed to do to keep flying.

First, it needed to receive an injection of cash. Then, it must maintain this cash at an undisclosed level.

The China Development Bank has taken the lead role in the restructuring of HNA’s debt together with eight other banks that include China’s four largest state-owned banks. From what we understand, the $568 million loan is for four years with an interest rate of 4.75%.

The HNA Group got itself in financial trouble following a debt-fuelled aircraft acquisition spree. This was then impounded upon by the Hong Kong protests that have caused a slowdown in passenger numbers.

China wants to keep Hong Kong Airlines flying

The fact that the HNA Group was able to secure the loan from state-owned banks points to political connections with the mainland authorities who do not want to tarnish China’s reputation by seeing the airline fail.

Hong Kong Airlines' safety has never been a concern with the licensing authorities, but its delayed capital investment and public boardroom squabbles have raised concerns.

In a statement regarding the airline's ability to pay its way the licensing authority issued a statement carried by Forbes that said:

 “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.”

To clarify, the word 'service' was referring to the airline's ability to maintain its flight schedule.

Despite Hong Kong Airlines' financial woes, the airline's ability to raise cash so fast may point to the fact that the Chinese authorities in Beijing now regard it as being too big to fail.