Hong Kong Airlines published its Practice Statement Letter on its official website on September 27th. The letter showed Hong Kong Airlines' restructuring plan is under Part 26A of the Companies Act 2006 of the United Kingdom.

According to the letter, Hong Kong Airlines, owned by Hainan Airlines Group, is seeking to restructure its 49 billion HK dollars ($6.24 billion) of debt through courts in the UK and Hong Kong to avoid liquidation.

Hong Kong Airlines further said it was seeking court approval to convene a creditors' meeting and propose a restructuring plan that would include a significant write-down of outstanding debt.

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Photo: Getty Images

Of Hong Kong Airlines' total debt of 49 billion HK dollars ($6.24 billion), aircraft lessors owe 22.5 billion HK dollars ($2.87 billion), banks and financial institutions owe 5.7 billion HK dollars ($730 million), and related parties owe 6.8 billion HK dollars ($870 million).

The hearing in the UK courts is scheduled for October 25th.

The restructuring plan

Firstly, Hong Kong Airlines plans to downsize its fleet by about two-thirds. According to adtb.aero, Hong Kong Airlines currently has 47 aircraft and consists of 25 Airbus A320s, 21 Airbus A330s, and one Airbus A350. It has been reported that it will get rid of all its widebody, while some argue that it is essential for its profitable international route like from Hong Kong to Tokyo and Osaka.

Secondly, Hainan Airlines Group and its anonymous joint venture partners plan to inject 3 billion HK dollars ($380 million) into the airline to tide it over.

Lastly, Hong Kong Airlines said unsecured creditors and key leaseholders are expected to recover about 5% of what they are owed, with pro rata payments for the remainder once they have weathered the storm.

The company said its restructuring plan requires 75% creditor support and has received approximately 73%. Failure to win approval could lead to liquidation.

Last week, it also emerged that in exchange for more creditor support for this "5% first" plan and to avoid liquidation, Hong Kong Airlines would pay more cash upfront to 'secured creditors,' up 2.5 percentage points from about 17 to about $45 million.

It is now unclear whether this method will help Hong Kong Airlines get 75% support to avoid liquidation. Critics say this last-minute effort indicates that the current situation is critical because it still does not have the support of 75% of creditors.

After both Hong Kong and Japanese governments loosened restrictions, Hong Kong Airlines has been using its A330-300 to fly to Osaka. The re-booming travel demands will bring income to the airliner.

However, the primary target market of Hong Kong Airlines is mainland China. As the policy remains ten days of quarantine, Hong Kong Airlines struggles between Cathay Pacific and Hong Kong Express. The current debt figure is astronomical for Hong Kong Airlines, relying only on Hong Kong customers.

Two days from the UK Court hearing, will the creditors demand the liquidation to get whatever they can? Or will they be patient and agree to the current restructuring plan? Let us wait and see.

Sources: atdb.aero; Aviation News Source