Hong Kong Airlines (HKA) has filed for debt restructuring amounting to $6.2bn in the Hong Kong and UK courts to avoid insolvency, reports Bloomberg. The Hong Kong and UK court hearings are scheduled on October 13 2022 and October 25, 2022, respectively.
HKA is linked to China’s HNA Group and has debts amounting to over $6.2 billion, the airline said in a statement. According to sources, the restructuring proposal needs 75% of creditors and has currently received approval from about 73%. A failure in securing approval will likely lead to an insolvency liquidation. Financial and operating aircraft lessors are seeking claims of $2.9bn, bank lenders and financial creditors are owed $730million and related party creditors have claimed $870million.
The HNA Group carrier stated: “HK Airline is seeking court approval to convene meetings of its creditors and put forward its restructuring proposal, which would include a significant haircut on the outstanding debt. Unsecured creditors and critical lessors are expected to recover about 5% of the money owed to them, as well as subsequent pro-rata cash payments if the turnaround succeeds.”
With this, the HKA will cut its operations by about 50% of the current capacity.
HKA airlines suffered a major blow due to the political unrest in Hongkong followed by the pandemic. In the practice statement letter, the airline said that the passenger numbers plunged from nearly 6.9 million from February 2019 to January 2020, to around 217,000 in 2021. With this decline, airline revenue tumbled to 85% forcing the airline to downsize the workforce by 65%, the airline said in a statement.
Sources claim that the airline plans to cut its fleet by almost two-thirds and HNA Aviation along with unnamed JV partners have planned to inject $380million to revive its operations.
However, with the restructuring, the airline hopes to deliver a strengthened and de-levered balance sheet, with lower overall gross debt as well as rationalized rental payments.