HNA Group tells warring HK Airlines parties to behave as battle for control of airline continues

20-Apr-2019 Intellasia | AFP | 6:38 AM Print This Post

HNA Group, the de facto parent company of Hong Kong Airlines, has finally broken its silence after four days of boardroom and shareholder infighting played out in the public arena.

The Chinese airlines-to-financial services conglomerate said it wanted to put an end to a fractious dispute that has seen an attempted management coup and allegations of financial impropriety leave the carrier in utter disarray.

A spokesman said allegations of wrongdoing “with respect to HNA Group are false”.

In its statement released on Friday morning, HNA denied accusations of theft and breaking-and-entering at HKA’s headquarters. It was also accused of having destroyed financial documents.

The airline, which is struggling financially, could lose its government-issued permit to fly if it cannot raise enough cash to honour the conditions of its licence.

The boardroom drama started on Tuesday when former HKA director Zhong Guosong claimed to have seized control of the carrier at an extraordinary general meeting of shareholders, joining forces with Frontier Investment Partners and proclaiming himself chair.

Zhong owns a 27 per cent stake in the carrier through Hong Kong Airlines Consultation Service (HKACS), while the private equity firm holds 34 per cent. HNA has a 29 per cent share.

But a day later, the incumbent chief Hou Wei assured staff in a memo that he was still in charge.

Shareholders are arguing over who has control of Hong Kong Airlines Co Limited, holding company of Hong Kong Airlines Limited.

The Hong Kong government has taken a dim view of proceedings. On Wednesday, the Transport and Housing Bureau, the Civil Aviation Department and the Air Transport Licensing Authority issued a rare joint statement on the affair.

The three government departments requested that the airline did not threaten aviation safety and operations through the internal shareholders’ dispute.

Zhong, the sole director of HKACS, hired public relations firm FTI Consulting and followed up his “legal control” of the company with regular daily statements accusing the corporate parent of the airline of financial impropriety.

What remained unclear was who was in control. A well-placed source said Frontier had been sold, which implied that control of its airline share was no longer in Zhong’s hands.

In light of the spectacle, HNA scolded the warring factions involved in the dispute.

“HNA Group is committed to the highest standards of integrity in all of its activities and expects the same of all of its representatives,” the company said in its statement.

On December 31, HNA sued HKACS demanding repayment of HK$854 million in debt.

Zhong had a 48.6 per cent stake in budget carrier HK Express, which had a complex network of ties to various HNA parties.

The airline was sold to Cathay Pacific Airways last month in a HK$4.98 billion deal, which Zhong vigorously opposed. For HK Express shareholders, only HK$2.25 billion would be paid in cash while the rest would cover outstanding debts.

HNA Group is also trying to offload assets after a $50 billion debt-fuelled foreign buying spree that caused financial turmoil within the group.

In the latest problems for the company, Hong Kong-listed CWT International, a unit of the HNA Group, on Tuesday defaulted on a HK$1.4 billion loan, whose lenders subsequently threatened to seize assets within 24 hours, though it is unclear if anything has been done to resolve the impasse.


Category: Hong Kong

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