Hong Kong Airlines license threatened after salaries delay
A day after Hong Kong Airlines admitted that salary payments for nearly half of its staff would be delayed as a consequence of its financial troubles, the Air Transport Licensing Authority of Hong Kong is reportedly considering suspending the carrier’s operating license.
As its activities are “severely affected” by social unrest and the consequent weak touristic demand, Hong Kong Airlines has been adjusting its network by closing routes in order to mitigate the damages. Routes towards Vancouver (YVR), Ho Chi Minh City (SGN), and Tianjin (TSN) are the latest affected. “Hong Kong Airlines has been reviewing its network strategy and will continue to focus on operating priority routes under the challenging business environment caused by the ongoing social unrest in Hong Kong,” it said in a statement.
But financial pressure might be too much for the carrier to handle. In an internal memo, Hong Kong Airlines notified that 1,600 employees out of 3,560 would see the payment of their wages postponed to December 6, 2019. Earlier in November 2019, local transport authorities ordered Hong Kong Airlines to take “proper arrangements” to improve its financial situation. Its survival could now be at stake.
The Air Transport Licensing Authority (ATLA) was due to meet representatives of Hong Kong Airlines on November 29, 2019, during which it was to “evaluate the information and explanation to be provided by HKA, and will consider whether there is a need to take appropriate action.”
“If it gets really bad they [ATLA] may turn the licence to a temporary licence and force HKA to restructure,” a source told the South China Morning Post, adding “that will be the second last resort. Otherwise the authorities will find remedial options to make sure HKA does not sell any more tickets and then revoke its licence.”
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. 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.
Financial woes of Hong Kong Airlines date back earlier than the political uncertainty, and its profitability has been questioned for a while. Media reports suggest that the company faced a loss of $383 million in 2018 and that it would need an injection of $255 million to stay airborne. Hong Kong Airlines is under the management of the debt-ridden Chinese conglomerate HNA Group, which has been actively trying to get rid of its stake since at least December 2018. On March 27, 2019, Cathay Pacific acquired the subsidiary Hong Kong Express for $628 million.
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