Hong Kong Airlines delays pay as unrest 'severely' hits business

Hong Kong Airlines Ltd is the first airline to hold back salaries because of the revenue squeeze.
Hong Kong Airlines Ltd is the first airline to hold back salaries because of the revenue squeeze.PHOTO: HONG KONG AIRLINES/FACEBOOK

HONG KONG (BLOOMBERG, REUTERS) - Hong Kong Airlines (HKA) is delaying salaries as protests have “severely affected” the city’s third-biggest carrier, whose finances were already under strain before anti-government demonstrations flared in June.

Only cabin crew and overseas employees will receive their November wages on time, while all other Hong Kong-based workers will be paid next Friday (Dec 6), the closely held airline said in an e-mail on Friday. It said revenue dipped significantly this month – a low travel season – and affected the monthly payroll.

The Air Transport Licensing Authority (Atla), which has the power to revoke flying rights, has also expressed concern about the airline.

“Atla is of the view that HKA’s financial situation has shown no sign of improvement,” the licensing body said last month, warning that it would “consider taking appropriate action” if no progress was made.

Months of anti-government protests have compounded the airline’s woes, weighing heavily on passenger traffic, while Hong Kong’s economy, already under pressure from the United States-China trade war, is in recession as tourist numbers plummet. 

The unrest has disrupted transport networks and temporarily paralysed the airport in August, prompting HKA to say at the time that it would adjust services.

“Hong Kong Airlines was probably hit the hardest by the social unrest among the four carriers in Hong Kong,” said Mr Ivan Su, an analyst at Morningstar Inc, noting that the airline has high exposure to mainland routes and is less able to offset a decline in travellers with revenue from international flights. 

The airline cut some operations earlier this month and plans to cancel Los Angeles-bound flights from next February.

“This one-off salary arrangement does not impact our daily operation,” it said. “Our staff remain professional and are committed to delivering a safe and smooth service to all our customers.”

Other airlines have been affected by the unrest too. 

 
 
 
 

Cathay Pacific Airways is one of the most high-profile business casualties, issuing profit warnings and coming under fire from the Chinese government as well as protesters. 

The airline plans to cut passenger flight capacity by 1.4 per cent next year, reversing an earlier plan for a boost of 3.1 per cent because of a challenging business outlook, an internal memo reviewed by Reuters showed. 

Revenue performance continues to be disappointing and advance bookings into 2020 remain much lower than expected due to weak traffic from some of its key markets, particularly mainland China, the memo said.

Singapore Airlines (SIA), China Eastern Airlines and Virgin Australia Holdings have also cut flights to Hong Kong, which is in danger of losing its status as Asia’s busiest airport for international traffic.

“We have seen a decline in demand for travel to Hong Kong in recent weeks and have reduced our flight capacity to Hong Kong,” an SIA spokesman told The Straits Times.

In order to provide airlines with greater flexibility in aircraft deployment to deal with the fall in passenger demand, the Civil Aviation Department (CAD) said airlines that fly to and from Hong Kong will be able to keep their prized airport slots even if they temporarily cut capacity due to weak travel demand until March.

Under more normal conditions, it is tough for airlines to get take-off and landing slots at Hong Kong’s airport, because it lacks capacity until a third runway comes into operation in 2024. 

A “use-it-or-lose-it” rule stipulates that an airline normally keeps slots out of historic precedence only if it can demonstrate it used them at least 80 per cent of the time in the previous airline scheduling season. The current winter season, which began on Oct 27, ends on March 28 next year. 

The CAD said in a statement to Reuters on Thursday that the “use-it-or-lose-it” rule had been temporarily suspended for the winter season. 

With additional contribution from The Straits Times