Seven Hong Kong Airlines planes seized by creditor

Hong Kong Airlines is not out of the woods yet. Two weeks after it received a cash injection from its main shareholder HNA Group, the airline reportedly saw seven of its aircraft impounded by the Hong Kong Airport Authority as securities.

On December 16, 2019, the Airport Authority Hong Kong (AAHK) said it took control of seven aircraft belonging to Hong Kong Airlines (HKA). The carrier owes payment for various charges, including aircraft parking fees, take-off and landing fees and the rent of commercial infrastructures such as VIP lounge areas and airport counters. If HKA fails to repay its debt, the planes should be auctioned.

Hong Kong Airlines operates an all-Airbus fleet of 39 aircraft that include twelve A320s, 21 A330s, and six A350s. Media reports suggest that the carrier faced a loss of $383 million in 2018. To mitigate the damages, it has been adjusting its network by closing routes and is now expected to end its long-haul operations in February 2020.

Due to the reduced operations, the detained aircraft had not been used for passenger transport in recent months and had stayed idle at the airport, according to the AAHK. Thus, the operations of HKA should not be affected.

The carrier came under the spotlight in late November 2019, following reports of delayed wage payment to nearly half of its staff (1,600 employees out of 3,560). The news led the Air Transport Licensing Authority of Hong Kong (ATLA) to consider suspending the carrier’s operating license. HKA was required to give the local aviation authorities guarantees that it is financially able to continue operating by December 7, 2019.

It was apparently saved in extremis after the Chinese conglomerate HNA Group, the main shareholder, secured a $568M loan from state-owned banks. When the day came, both the Civil Aviation Department (CAD) and the ATLA announced that Hong Kong Airlines was authorized to continue operating as it provided sufficient proof of financial improvement.

After six months of protests, tourism is at a record low in Hong Kong. Cathay Pacific saw its traffic with China drop by nearly 22%, and arrivals in Hong Kong have decreased by half. Hong Kong International Airport reported a drop close to 1 million passengers in November 2019 when compared to the previous year.

Operations have been also directly affected: on August 12, 2019, Hong Kong International Airport (HKG) canceled flights after protesters organized a sit-in at the airport to denounce police violence.

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