China's heavily indebted HNA Group has finally issued a public statement about the boardroom and shareholder infighting which has been going on for several days at its financially struggling carrier Hong Kong Airlines (HKA). HNA holds a 29% stake in the unit.
HNA Group 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. HNA also
denied accusations of theft and breaking-and-entering at HKA’s headquarters. It was also accused of having destroyed financial documents.
The boardroom tussle started last week 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 chairman.
Shareholder dispute disrupts operation
Zhong owns a 27% stake in the carrier through Hong Kong Airlines Consultation Service (HKACS), while the private equity firm holds 34%. Hong Kong Airlines operates a fleet of 38 Airbus aircraft and flies to around 40 Asia-Pacific and North American destinations.
Following Zhong's announcement of the take-over, HKA's incumbent chairman Hou Wei issued a memo the next day in which he assured staff that he was still in charge. In an April 18 statement, the airline said that it "has always focused on delivering a safe and smooth operation.”
“However, the recent dispute among the company’s shareholders has seriously disrupted the order and operation of our office. As a result, we had to hire third-party security personnel and lawyers to assist us in dealing with the situation. As a private company, Hong Kong Airlines does not comment on its shareholding structure. However, we believe that our stakeholders will solve the issue in a professional and impartial manner.”
Zhong accused HNA of financial impropriety
Media reports, however, said that Zhong - the sole director of HKACS - has meanwhile 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 (HNA Group) of financial impropriety.
Meanwhile, the Hong Kong government has also reacted to the Hong Kong Airlines boardroom spat with the Transport and Housing Bureau, the Civil Aviation Department and the Air Transport Licensing Authority issuing a rare joint statement on the affair. The three government departments requested the airline not to threaten aviation safety and operations through the internal shareholders’ dispute.
Insiders believe that the Hong Kong Airlines boardroom dispute already started in December last year, when HNA sued HKACS demanding repayment of HK$854 million in debt.
Efforts to sell Hong Kong Airlines have failed
According to a report in the South China Morning Post, Zhong also had a 48.6% stake in budget carrier HK Express, which had a complex network of ties to various HNA parties.
As earlier reported, HNA last month sold HK Express to Cathay Pacific Airways for HK$4.93 billion (US$628 million). A deal which was reportedly vigorously opposed by Zhong. For HK Express shareholders, only HK$2.25 billion would be paid in cash while the rest would cover outstanding debt of HK$2.68 billion. Efforts to sell Hong Kong Airlines, which is the only commercial airline in the city not controlled by Cathay, have so far been unsuccessful.
Risking the loss of further assets
The Hong Kong Airlines board room tussle coincided last week with yet another financial problem facing HNA Group when Hong Kong-listed CWT International, a unit of the Group, said in a statement that it had failed to pay interest payments and fees on the HK$1.4bn (US$179m) loan. This prompting lender to demand the subsidiary repay the full loan and interest or risk the loss of almost all of its remaining assets.
CWT, which was formerly known as HNA International Investment Holdings, last year sold warehouse properties in Singapore for US$539m. It acquired the warehouses in 2017 when it bought CWT International, a Singaporean logistics company whose name it subsequently adopted.
Nol van Fenema