Hong Kong Airlines (HKA) faces the prospect of being wound up by 7 December, if it fails to turn its troubled financial situation around.

Hong Kong Airlines (HKA) faces the prospect of being wound up by 7 December, if it fails to turn its troubled financial situation around.

In an ultimatum issued to the beleaguered carrier, in which it ordered “immediate and resolute action” to be taken, Hong Kong’s Air Transport Licensing Authority (ATLA) laid down two new licensing conditions for the carrier.

It must, by a certain deadline, ensure that cash is injected, and also be able to raise and maintain its cash and cash equivalents. ATLA says it will stipulate what the limit will be, but did not provide any details.

ATLA’s strongly-worded statement against HKA comes after it held another round of talks with the carrier on 29 November.

“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, says. A decision will be made, and announced, by 7 December.

Separately, Hong Kong’s Civil Aviation Department (CAD) says that it has requested for HKA to confirm if it would still be able to operate safely and stringently in accordance with the territory’s laws.

The department says it will “take appropriate actions” accordingly, including – but not limited to – “varying, suspending or revoking HKA’s [air operator’s certificate]”.

The CAD adds that it has for the past year stepped up checks on HKA’s flight operations and aviation safety standards. In total, it has conducted 180 scheduled and unscheduled checks.

“The CAD also actively inspects and audits HKA to ensure that its various aspects including equipment, organisation, staffing, maintenance and other arrangements comply with the standards… and to secure its proper and safe operation in compliance with the conditions specified in its AOC,” the department states.

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

ATLA took the view that HKA’s financial position has “deteriorated rapidly”, such that it was hampered in its ability to fulfil its obligations as an employer to pay the salaries.

HKA also 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. HKA suspended Los Angeles then, and adjusted frequencies to nine other points in its network, including Osaka, Okinawa, Tokyo and Bangkok.

Then, on 29 November, 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”.

A day later, it issued a statement saying that in-flight entertainment across its fleet will be “out of service” from 1 December, “until further notice”.

In a statement responding to the authorities’ latest move, HKA says it is “actively communicating with our shareholders and other stakeholders to meet the new requirements”.

It again blamed the ongoing unrest in Hong Kong for causing weakened demand, and consequently affecting its business and revenue.

“We have addressed our financial situation by implementing cost-savings measures, while adjusting our operation from time to time to respond to changing market demand,” HKA states.

It adds: “We will remain professional and deliver our best customer service to all passengers.”

Story updated with HKA statement