Hong Kong carriers under pressure

By Damian Brett

Cathay Pacific and Hong Kong Airlines are both facing pressure, with the latter facing the prospect of being wound up by authorities.

Earlier this week, Hong Kong’s Air Transport Licensing Authority (ATLA) issued an ultimatum to Hong Kong Airlines, saying it must secure a cash injection and raise and maintain its cash and cash equivalents.

“If HKA fails to improve its financial situation as required by ATLA by the deadline, ATLA will take further action,” the authority, which has the power to revoke a carrier’s operating licence, said. A decision will be made on December 7.

Following the ultimatum, parent company the HNA Group secured a $568m loan from state banks, which it said would be used to pay wages, aircraft leases, fuel airport charges and other costs – although it did not specify which subsidiaries the cash would go towards.

The airline reportedly failed to pay November salaries for some of its staff, delaying payment till the first week of December.

The airline undertook two rounds of capacity cuts in recent weeks.

In early November, it said it was slashing capacity by 6% as its financial problems mounted. The airline suspended Los Angeles then, and adjusted frequencies to nine other points in its network, including Osaka, Okinawa, Tokyo and Bangkok.

Then, on November 29, as its management met with ATLA, it completely withdrew from the North American market, axing Vancouver from the network. HKA also suspended Tianjin and Ho Chi Minh City, and said it will be focusing on “priority routes”.

Hong Kong’s Civil Aviation Department (CAD) has requested for the airline to confirm if it will still be able to operate safely and stringently in accordance with the territory’s laws.

The airline has blamed the recent unrest in Hong Kong for its woes.

“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,” the airline said.

“Hong Kong Airlines is actively communicating with our shareholders and other stakeholders to meet the new requirements from ATLA, as requested.”

Living up to standards

Meanwhile, subsidiary HongKong Air Cargo continues to operate flights using its five A330 freighters.

According to Flight Radar 24, since the start of the month the carrier has operated freighter flights to Zhengzhou, Almaty, Istanbul, Ho Chi Minh City, Dhaka, Hanoi, Singapore, Kuala Lumpur, Shanghai, Taipei, Hangzhou and Bangkok.

Meanwhile, Cathay Pacific has also announced that it will make capacity cuts as it battles the situation in Hong Kong.

Air Cargo News sister title Flight Global reports that a letter to staff from chief executive Augustus Tang said that the airline’s situation had deteriorated in recent weeks and it will cut seat capacity by 1.4% year on year.

The cuts will take place across the network, but no routes will be removed.

He cited a number of challenges, including the pro-democracy protests that have roiled Hong Kong in recent months, which caused the Hong Kong economy to shrink 3.2% in the third quarter in 2019. Traffic has fallen from key markets, with Tang singling out Mainland China.

Cathay Pacific and Cathay Dragon carried 183,119 tonnes of cargo and mail in October, a drop of 4.9% compared to the same month in 2018.

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