HNA Wants End to Hong Kong Airlines Board Room Battle

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.

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.