Aircraft Lessor Moves To Shut Down Hong Kong Airlines

Simple Flying

By Andrew Curran

Published Mar 17, 2022

Stellar Aircraft Leasing is taking Hong Kong Airlines to court over an aircraft lease dispute and wants to wind up the airline.

Photo: Hong Kong AIrlines

An Irish aircraft leasing company has applied to wind-up HNA subsidiary Hong Kong Airlines. Stellar Aircraft Holding 1 Ltd, a company based in Dublin, has filed a petition in the High Court with an initial hearing set down on May 11. The lessor has an Airbus A330-300 placed at Hong Kong Airlines.

Latest in a series of blows for Hong Kong Airlines

With Cathay Pacific snares the lion's share of Hong Kong airline-relation media attention, smaller carriers based at Hong Kong Airport normally compete for market share out of the airport with Cathay, especially on flights into mainland China and around Asia. Like Cathay Pacific, the almost total shut down of Hong Kong Airport has impacted second-tier carriers like Hong Kong Airlines hard.

The airport's most recent passenger traffic figures cover January and reveal just 71,000 passengers passed through the airport that month. In comparison, the figure for January 2020 was 5.7 million.

But Hong Kong Airlines' difficulties predate the pandemic. In late 2019 the carrier secured a $568 million loan via HNA Group. Around the same time, it ended long-haul services. In June last year, 700 Hong Kong-based and overseas employees were made redundant. In the same month, the airline grounded its fleet of twelve Airbus and most of its A330s.

An Airbus A330-300 is the center of the dispute between Stellar Aircraft Leasing and Hong Kong Airlines. Photo: Airbus

Stellar Aircraft Leasing has an Airbus A330-300 placed at Hong Kong Airlines

As ch-aviation.com notes, the initial court documents don't specify the exact reason behind the petition to wind-up Hong Kong Airlines and the nature of the relationship between the two parties, but unpaid lease payments is one likely scenario.

Hong Kong Airlines has 29 jets, but 25 of those remain parked. Twelve of those 29 planes are A320-200s, nine are A330-300s, seven are A330-300s, and there is a single A350-900. The four aircraft still flying come from the A330-300 fleet and fly cargo. Sixteen jets in Hong Kong Airlines' fleet are leased.

The plane at the center of the May court hearing is B-LHD. The A330-300 went to Hong Kong Airlines in 2017 after formerly flying for Singapore Airlines and TransAsia Airways. Currently, B-LHD is parked at Châteauroux-Centre Marcel Dassault Airport in France.

This is not the first time Hong Kong Airlines is fronting court over aircraft leases. Last year, Kuwait-based Alafco Aviation Leasing obtained a $27 million judgment in its favor from Hong Kong's High Court regarding a disputed lease agreement with Hong Kong Airlines.

Over half of Hong Kong Airlines aircraft are leased. Photo: Hong Kong Airlines

Bigger problems at Hong Kong Airlines parent company?

And this legal action isn't the only headache for Hong Kong Airlines' majority stakeholder, HNA, and its aviation arm, HNA Aviation. Chinese media are reporting the current chairman of HNA Aviation, Bao Qifa, and the chairman of the Group's supervisory board, Sun Mingyu, were "taken away" by police earlier this week.

While no official reason is given for the arrests, informal advice is that the arrests are connected to the arrest of HNA Group Chairman Chen Feng and Chief Executive Officer Tan Xiangdong in September last year. Those arrests were related to the financial quagmire the HNA Group found itself in and a general crackdown on financial adventurism by Chinese authorities.

At the time of publication, while remaining silent, HNA Aviation appears to be removing Bao Qifa from his various roles there.