Hong Kong Airlines secures funding; licences upheld

December 10, 2019 10:21 am
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Asianmail Desk

Hong Kong Airlines (HX, Hong Kong Int’l) has been allowed to continue operating, at least for the meantime, after Hong Kong regulator’s accepted the struggling carrier’s latest financing plan, submitted ahead of a December 7 deadline.

In separate statements issued on Saturday, Hong Kong’s Civil Aviation Department (CAD), the Transport and Housing Bureau (THB), and the Air Transport Licensing Authority (ATLA) all conceded that Hong Kong Airlines had met their respective technical and financial benchmarks to warrant its continued operation.

For its part, the ATLA said Hong Kong Airlines had submitted its financing proposal during a meeting on Friday, December 6. In the proposal, the regulator said, the carrier had shown evidence it had raised its cash and cash equivalent to the level stipulated by the ATLA and pledged to maintain it at said level. However, the ATLA has sought more specific details from the airline.

“After reviewing all the information submitted by HKA in relation to the new conditions attached by ATLA, including the fact that HKA has raised the cash and cash equivalents to the level required by ATLA and pledged to maintain the level, ATLA has decided not to take further actions against HKA for the time being, pending the airline’s submission of further details regarding Condition 1 [Evidence it had raised its cash and cash equivalent to the level stipulated by the ATLA]. In reaching the above decision, ATLA has given careful consideration to factors including public interests and the policy direction of maintaining Hong Kong as an international aviation hub.”

“The ATLA will continue to closely monitor the overall operation of HKA, and will ask HKA to continue to improve its operational efficiency and modify its long-term operational strategy. ATLA will take appropriate actions in light of the circumstances as necessary.”

On the back of the ATLA’s statement, the CAB said it had decided to uphold the validity of Hong Kong Airlines’ Air Operator’s Certificate (AOC).

“Having examined HKA’s representation and considered factors including the results of our inspections of HKA lately and the relevant inspection track record, the CAD has been satisfied that HKA is able to continue to operate properly and safely in strict accordance with the Air Navigation (Hong Kong) Order 1995,” a CAD spokesman said. “The CAD, therefore, has decided not to take further action according to Article 62 of the Air Navigation (Hong Kong) Order 1995 against HKA’s AOC for the time being. Nevertheless, the CAD will continue to closely monitor HKA’s operation and take decisive actions should HKA be found unable to operate in accordance with the Air Navigation (Hong Kong) Order 1995.”

“Moreover, the CAD has reminded HKA to operate stringently in accordance with the Air Navigation (Hong Kong) Order 1995 to ensure aviation safety. The CAD will continue to closely monitor HKA’s flight operations and aviation safety standard, as well as actively inspect and audit HKA in order to verify that its equipment, organisation, staffing, maintenance and other arrangements comply with the above-mentioned legal requirements, for the purpose of ensuring its proper and safe operation in accordance with the conditions specified in its AOC.”

Last week, fellow HNA Group member and part shareholder Hainan Airlines Holdings (HAH) said it had secured a CNY4 billion yuan (USD568 million) syndicated loan from eight Chinese state-owned banks. Though it did not specifically mention Hong Kong Airlines by name, HAH did concede it would be used to cover its own as well as its interests’ operating expenses such as fuel, employee wages, aircraft leases, and airport charges.

In its own statement issued after the Hong Kong authorities’ decision, Hong Kong Airlines confirmed that it had devised a cash injection plan following urgent consultations with its stakeholders, including shareholders and management. However, disbursement of the liquidity, whose value was not disclosed, will only be done in phases and will be accompanied by deeper cost cuts.

“Over the past year, Hong Kong Airlines has rolled out a consolidation programme to cut costs, optimize its network and elevate the customer experience. Moving forward, we will continue to drive consolidation and strengthen our internal structure to operate more efficiently and improve our revenue,” it said.