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China reported to stage rescue of stricken carriers
February 21st 2020
China is considering a package of measures to lend support to its national airlines amid the sharp drop in demand due to COVID-19, Bloomberg news agency reported this week. Read More »
Support could include direct cash injections, allowing larger airlines to take over smaller rivals and reduce loan repayments.
The COVID-19 outbreak, which began in the central Chinese city of Wuhan, has decimated passenger demand to and from China as well as within the country.
While the big three Mainland carriers, Air China, China Eastern Airlines and China Southern Airlines, had the capability to withstand the downturn, the fate of other airlines in China was less certain.
The flow-on impact of the virus outbreak on the global economy had also hit debt-laden conglomerate HNA Group, whose portfolio includes Hainan Airlines and Hong Kong Airlines.
HNA Group has been selling assets as part of efforts to reduce debt and restructure the business.
Bloomberg said the government of Hainan was in talks to take control of HNA's airline assets and sell some of them to China's big three airlines.
News of the potential bailout comes after Hong Kong Airlines (HKA) announced it would no longer serve meals on any of its flights, with business class passengers to receive a bottle of water and economy class passengers a "cuplet" of water. Pillows and blankets have been removed from the aircraft.
HKA said on its website the temporary change was a precautionary measure to reduce the risk of passengers and crew from being potentially exposed to the coronavirus. However, the South China Morning Post reported the move was an attempt to cut costs amid financial challenges.
The newspaper said the airline had instigated its first round of redundancies with 170 employees, mostly flight attendants, leaving the airline this week. Earlier this month, Hong Kong Airlines said it would be making 400 staff redundant, with other staff to take up to two months unpaid leave between now and June.
This week, Hong Kong Airlines said it would close its Club Altus premium passenger lounge at its Hong Kong International Airport hub. Its Club Bauhinia lounge remained open.
The HNA Group carrier has operated with its inflight entertainment system switched off since December 2019. Qantas chief executive, Alan Joyce, said some airlines might not recover from the impact of the coronavirus outbreak.
"What we are going to see out of this is probably a lot of the weaker airlines either being consolidated or going out of business," Joyce told reporters at Qantas's 2019-2020 first half results presentation in Sydney on Thursday.
"I think that's what usually happens in these situations."
