Hong Kong Airlines Plans To Pay Staff On Thursday

Besieged by a growing debt burden Hong Kong Airlines says it will have the funds available to pay staff wages tomorrow, Thursday the 5th of December 2019.

Earlier, the embattled airline had planned on holding off paying staff and creditors. That was until the regulators in Hong Kong threatened to take away the airline’s license to operate.

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Hong Kong Airlines just got a $568m loan. Photo: HKA

On Monday, the Air Transport Licensing Authority (ATLA) told Hong Kong Airways that they had until Saturday, December 7th to come up with more cash or face risking their license.

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Hong Kong Airlines is blaming the protests

Citing increased operating costs and the ongoing pro-democracy protests for its woes, the troubled airline announced that it would be withholding some staff’s salaries and canceling all flights to North America.

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However, the Hong Kong protests seem to be nothing more than a convenient scapegoat for Hong Kong Airlines. It was already struggling before the protests started in June.

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Hong Kong Airlines is blaming the protests for its troubles. Photo: HKA

Back in April, people with insider knowledge of what was happening at the unlisted airline claim that HKA lost HK$3 billion ($300m) in 2018.

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The Hong Kong Air Transport Licensing Authority had already asked the Chinese owned airline to provide financial records. This followed a change of directors, which as believed to have happened due to the airline’s financial difficulties.

Visitor numbers to Hong Kong are down

Since then the protests have only compounded the airline’s plight putting it in the venerable position of being the biggest casualty in a downturn that has also hit Cathay Pacific, Qantas and Cebu Air.

Hong Kong Airlines’ problems, while not entirely due to the protests, have helped highlight the travel sector’s vulnerable position. The former British colony’s biggest airline, Cathay Pacific, has seen its share price trading at levels not seen for decades. This too is due to a downturn in business.

In October visitors from mainland China dropped by 46 % compared to a year ago and overall visitors to Hong Kong dropped by 44%.

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The Chinese government will not let Hong Kong Airlines fail. Photo: HKA

With no end to the protests in sight and Beijing refusing to come to a compromise, the International Monetary Fund (IMF) called on the Hong Kong Authorities to spend money to help prop up the economy.

According to the IMF, the region’s biggest financial hub will see its economy shrink by 1.2% in 2019.

Hong Kong Airlines will keep flying

Unlike British tour operator Thomas Cook, India’s Jet Airways and Iceland’s low-cost carrier WOW, HKA will most likely stay in business even though the figures don’t support this.

On Monday night, Hong Kong Airlines owner, the China-based HNA Group, announced that it had secured a four billion yuan (US$568 million) loan from Chinese state-owned banks.

With regards to the new loan, which is for a three-year term with an interest rate set at 4.75%, Hong Kong Airlines issued a statement 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.”

For Hong Kong Airlines to secure a large loan from Chinese state-owned banks suggest that the Chinese government wants to avoid the embarrassment of seeing the airline fail.

What do you think? Please let us know in the comments.

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