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Hong Kong Airlines faces cash flow difficulty
August 30th 2019
Protests have impacted the Hong Kong hub. Former CCO returns to airline. Read More »
Former Hong Kong Airlines (HKA) chief commercial officer, Li Dianchun, has returned to the airline as vice president. Li left HKA in 2017 to become president of sister airline, HK Express, which he subsequently left after Cathay Pacific’s acquisition of the LCC.
Li laid the foundation for HKA’s transition to long-haul flying. He returns to a different HKA. Management has been over-hauled, long-haul pared back and overall expansion reduced. There is more focus on what HKA needs to do to rebuild. But first there are plenty of short-term challenges ahead.
It has been a difficult month for the Hong Kong aviation hub, including HKA. A memo from HKA management to staff seen by the South China Morning Post (SCMP) warned of ongoing cash flow difficulties.
Its staff was advised to use up annual leave and was told the company was considering part-time work and unpaid leave for employees. The SCMP said staff would be paid a few days late this month, but a spokesperson said: “We value our staff and pay their salaries on time.”
While June and July were satisfactory for HKA, August bookings decreased 13% and forward bookings for the rest of the year are down 30%, the SCMP said. Protests in Hong Kong received more international attention when held at the airport, although the initial protests in the final week of July did not disrupt operations. But later protests resulted in extensive flight cancellations and one protest turned violent.
But there are other factors besides Hong Kong turmoil affecting HKA’s passengers and forward bookings. The Hong Kong dollar’s peg to the US dollar has made the city more expensive, especially for shopping, a prime activity for mainland visitors.
Before the protests, HKA reduced capacity for commercial reasons. Unlike Cathay Pacific, which has a greater number of source markets available to it, HKA is heavily dependent on China as its main source market. There are apparent delays in mainland China approving travel to Hong Kong.
One of HKA’s main traffic corridors is connecting the Mainland to Bangkok via Hong Kong. There is a downturn in Mainlanders visiting Thailand owing to a boat tragedy last year that killed Chinese tourists.
HKA has a small play in the China-Taiwan market. The limited number of cross strait flights creates an opportunity for intermediate airlines to sell spare capacity despite the circuitous routing. China has stopped approving travel permits for Taiwan, denting demand.
“To let us get prepared for the foreseeable difficult time in Hong Kong, you are encouraged to clear your unused annual leave and the company will also consider implementing additional measures, such as part-time options or unpaid leave programmes to all employees across the board,” the memo said to staff.
HKA is expected to undergo a shareholder change in the autumn.
