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MARCH 2019

Week 11


Hong Kong Airlines faces regulatory ban

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March 15th 2019

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Airline could be prohibited from adding new cities or growing frequencies in setback to restructuring. Read More »

While Hong Kong Airlines awaits a long-term strategy, there are prudent short-term adjustments to make. Yet these have seemingly been cancelled as a result of regulatory action that prohibits the airline from adding flights, according to a source familiar with the matter. HKA declined to comment at press time and the regulator could not be reached.

Hong Kong is said to have rejected HKA's plan to start a new service to Nagoya in June. HKA is cancelling or reducing some flights to long-haul markets, which are unprofitable. This generates capacity that can be re-deployed, such as regional markets that are expected to be profitable.

HKA planned to introduce service to Japan's Nagoya, Niigata and Tokyo Haneda, according to sources. Japan is a popular outbound market from Hong Kong and smaller local airports often offer generous incentives for new flights. HKA sister HK Express is prominent in Japan and already serves Nagoya and Tokyo Haneda.

HKA also planned to increase frequencies in existing markets. A fourth daily flight to Beijing has already been announced.

It is unclear how long the regulatory action is in force for and if it only covers new frequencies or also prohibits change of equipment on existing flights. HKA had been considering up-gauging flights from A330s to A350s.

Hong Kong authorities most recently publicly aired grievances after HKA received a lawsuit due to unpaid aircraft leases. The Air Transport Licensing Authority has made three statements since December 2018. The most recent statement is from 27 February and said "ATLA is gravely concerned" and requested HKA to explain the situation. "ATLA would consider the information to be submitted by HKA and would continue to keep in view the development and take necessary follow-up action(s) on the matter."

HKA's 2014 prospectus noted CAD restricted the airline's AOC to 17 A330s and eight A320s, which was subsequently lifted. CAD from November 2017 to April 2018 prohibited sister HK Express from adding new aircraft or increasing flights.

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