Hong Kong Airlines (HKA) has been put in the awkward position of having to assure investors and the travelling public that it is not ceasing operations, after being hit by a series of negative news reports.

The latest reports suggest that the Hainan Airlines Group (HNA)-controlled carrier may struggle to meet financial obligations, with interests on its perpetual bonds due on 26 January. The Hong Kong government is said to be assessing the potential impact should the airline collapse during the upcoming lunar new year peak travelling period.

The reports have forced the bonds' issuer, HKA's wholly owned financial unit Blue Skyview, to say that it will be able to meet interest payments on time and that the airline's business continues to operate normally after taking into account business prospects, internal resources and available credit facilities.

It also responded to market rumours on the airline’s financial liquidity: "After making reasonable enquiries, Hong Kong Airlines would like to clarify that the market rumours are without basis, malicious and misleading."


HKA has issued three statements stressing that it has been and will continue to operate as normal, the latest on 9 January. This came just four days after it condemned "untrue and groundless speculations" that the airline is "ceasing operation and applying for liquidation".

Reports have also surfaced that China Development Bank will likely provide the carrier with a $550 million loan to cover its debts. CDB, HNA's biggest creditor, is also reportedly supervising the debt-laden group's asset disposals.

It is unclear exactly how much of HKA is owned by HNA. In stock exchange disclosures in July 2017, it was announced that two HNA subsidiaries were to transfer a combined 58% stake in HKA to Cayman Islands-registered firm Frontier Investment Partner.

HNA has apparently also been engaging potential investors for its stakes in HKA, as well as low-cost unit Hong Kong Express. Singapore sovereign wealth fund Temasek Holdings was understood to be an interested party.

HKA will only say that it is operated by an independent Hong Kong-based management team, and that as a private company, it does not disclose its financial performance nor comment on market rumours or media speculation.


Concerns first arose in mid-December, when word got out that several of its senior executives had departed. These include co-chairman Zhang Kui and vice-chairman Tang King Shing. The South China Morning Post has reported that chief financial officer Jacky Lui and marketing chief George Liu have also left their positions.

HKA has in recent years been undergoing a transition, building itself as a "global player" from its long-held regional status, and going up against Cathay Pacific.

It broke into North America in 2017, first with the launch of nonstop services to Vancouver using Airbus A330-200s, followed by services to Los Angeles and San Francisco with its new Airbus A350-900s.

The plan is to further expand into North America and Europe. The airline had talked about launching flights to London and New York by the end of 2018, but neither materialised. There also appears to be a slowdown in its fleet expansion, failing to meet the target of having 56 aircraft by the end of 2018. Flight Fleets Analyzer shows that HKA has 38 jets in service – 21 Airbus A330s, 11 A320s and six A350s. Its plan had been to end 2018 with nine A350s.


The long-haul market HKA wants to enter is not without competitors – and numbers seasoned brand names such as Cathay Pacific and Singapore Airlines to contend with. HKA is also constrained by bilateral limits with many already fully utilised by Cathay. The carrier believes, however, that the market is "large enough" for all players and that it also has a solid regional network that will provide strong feed-in flights for its long-haul ambitions.

HKA network – January 2019

hka network

FlightMaps Analytics

FlightGlobal schedules data shows that its regional network centres on North Asia, although it also reaches southeast Asia and India. It also has a substantial network into China, accounting for 18.3% of all seats from Hong Kong to the mainland, the second largest after Cathay's 44.4%.

Besides just serving Hong Kong, HKA also sees the massive opportunities in providing access to the Pearl River Delta Region, which has a population of nearly 60 million.

It markets itself as a "new luxury carrier", offering fun, affordable and good service. Its fares are typically about 10-20% lower than that of Cathay’s.


HKA's strategy has sometimes raised eyebrows. In 2011, it made headlines when it signed for 10 Airbus A380s, with plans to put them on long-haul services to points such as Paris, London and Sydney. It operated all-premium Hong Kong-London Gatwick flights using Airbus A330-200s in 2012 before axing the unsustainable service seven months later.

The airline also had ambitions for a listing on the Hong Kong Exchange. Applications were under way, with a target to raise as much as $500 million to fund fleet expansion. This lapsed in early 2015, however.

HKA has clearly gone through several strategy changes, but it looked as though it was entering its next phase of expansion before it was dragged down by troubles at HNA.

In the circular for the 2017 bond issue, the airline made clear that its business relies on HNA and its associates, being linked in several ways, from aircraft leasing to passenger and cargo block arrangements, as well as codeshares.

It would be a shame should the troubles at HNA bring down the airline and leave Hong Kong with only one homegrown full-service player.

Source: Cirium Dashboard