HONG KONG (BLOOMBERG) - Embattled Hong Kong Airlines said it has drawn up an initial plan for a cash injection and will pay staff who had their salaries deferred after regulators threatened to revoke its licence unless the company improves its finances.
Services at the airline, backed by Chinese conglomerate HNA Group, will gradually return to normal as soon as the funds arrive, according to a statement from the company. Payments to staff will be made on Dec 5, it said on Wednesday (Dec 4).
The Air Transport Licensing Authority on Monday told Hong Kong Airlines to raise more cash or risk losing its licence, saying it would make a decision by Saturday. The carrier said last week that it was delaying salaries for some staff and cutting more flights next year. It said months of unrest in Hong Kong had severely damaged its business as tourist numbers slumped.
Hong Kong Airlines was struggling even before anti-government protests began flaring in June. The authorities including ATLA made repeated requests for the airline to provide details on its financial situation following changes to its board of directors last year and reports of business difficulties.
The protests compounded the company's troubles and put it on verge of becoming one of the highest-profile corporate casualties in a downturn that's hit peers across Asia, from Cathay Pacific Airways to Qantas Airways and Cebu Air.
Retail, tourism and many other industries have also been badly hit by the social turmoil and the economy is in recession.
With no sign that protesters and the Beijing-backed leadership will come to a resolution any time soon, the International Monetary Fund on Wednesday called for significantly more government spending to support the troubled economy. The IMF expects the financial hub's economy to contract 1.2 per cent this year.
Closely held Hong Kong Airlines didn't provide any more details on its cash injection plan. The carrier ranked 24th in the SkyTrax 2019 World Airline awards and flies as far as North America and Australia with a fleet of 39 Airbus planes.
The airline's troubles highlight the travel industry's vulnerable position amid the protests. In October, arrivals from mainland China tumbled a record 46 per cent, while visitors to Hong Kong fell 44 per cent overall. Cathay's shares are trading near the lowest in a decade.