Hong Kong Airlines has had seven of its planes seized by the city’s Airport Authority after it failed to make some payments, deepening concerns about the future of a carrier whose financial difficulties nearly cost it its flying license.
The seizure was made in accordance to the Airport Authority Ordinance, the government body said in an email Tuesday, citing a section of the rules that addresses overdue charges. The statute allows the authority to sell the planes if the charge’s aren’t repaid within 60 days of the detention
Hong Kong Airlines, whose fleet consists of 39 Airbus SE planes, said the company’s operations remain normal, but some of its aircraft haven’t been scheduled for operation and were suspended from service under the Airport Authority’s arrangement.
The move is the latest sign that Hong Kong’s aviation sector, Asia’s busiest for international traffic, is facing its toughest year since the global financial crisis after months of anti-China protests drove away visitors and tipped the city’s economy into recession. Cathay Pacific Airways Ltd., Hong Kong’s dominant carrier, has warned it’s bracing for a significant deterioration in earnings.
“Typically, aircraft being seized is a prelude to operations being shut down” for an airline, said Paul Yong, an analyst at DBS Group Holdings Ltd. in Singapore. “Load factors are running below breakeven, so carriers are losing money on flights in and out of Hong Kong. So what’s happening at Hong Kong Airlines is not surprising.”
For closely held Hong Kong Airlines, which was struggling even before the demonstrations flared in June, the plane seizures show the carrier continues to grapple with liquidity challenges despite averting closure earlier this month.
