For Hong Kong Airlines the future is very, very uncertain. Cuts continue it is unlikely they will be enough to keep the carrier afloat too much longer barring a significant cash infusion and restructuring of the business. This week it is the inflight entertainment system that disappeared.
IFE content costs money and the service providers responsible for managing the selection, encoding and delivery of videos to the planes are not fans of getting shorted. Global Eagle is one of the larger players in that market and since 2015 has performed those services for Hong Kong Airlines. The company was stuck holding the bill for such services as some of its other airline customers collapsed. It appears less inclined to allow that situation to progress any further with Hong Kong Airlines.
Hong Kong Airlines routes cut, staff unpaid
The IFE content payments arguably are the least of the carrier’s concerns. Many staff were not paid their November salaries owing to cash flow issues at the company.
The carrier also was called to the table by Hong Kong’s Air Transport Licensing Authority (ATLA) to report on its financial condition. The meeting occurred on 29 November 2019 and the regulator will issue any appropriate actions at its discretion. It can revoke the operating authority of the carrier should it deem the financial situation such that operations or safety are at risk. It could also force the carrier to shed more routes or add other conditions to the operating license.
Earlier this year Hong Kong Airlines deferred delivery of several new Airbus widebody aircraft; those planes have since found new homes at other airlines. The company also cut its long-haul routes to North America. San Francisco cuts were announced first, followed by Los Angeles and as of this week Vancouver. While some of the flights could operate into February based on current plans there is a very real risk that they will end sooner.
Hong Kong Airlines’ ownership structure is complex but leads back to HNA Group, a mainland Chinese conglomerate that spent billions to launch airlines or buy up aviation-related companies over the past decade. It is now cashing out as it seeks to cover its massive debts. It sold Hong Kong Express Airways to Cathay Pacific in March. Catering giant GateGroup was purchased in 2016 and sold off earlier this year.
The company has sizable investment positions in more than ten mainland China airlines as well as others around the globe. It held a large stake in French airline Aigle Azur which halted operations in September. It also holds large positions in Brazilian carrier Azul and Virgin Australia. HNA Group also holds major stakes in airports around the globe and Avalon, the third largest aircraft leasing company globally.
HNA Group is not investing additional cash in the operation currently, in part due to its own instability.
Beyond the Hong Kong protests
While the current political unrest in Hong Kong is not helping the carrier’s situation the financial troubles started much earlier. Still, the reduced demand for travel to or through Hong Kong is likely to be felt by the carrier for some time to come.