HK AIRLINES AMBITIONS HIT TURBULENCE

Hong Kong : The owner of Hong Kong Airlines compares it to a wayward child sent to the headmaster’s office. The trouble that the six-year-old carrier is in will “help it grow up”, says Chen Wenli, board director of Hainan Airlines Group (HNA), the Chinese state-controlled conglomerate with global ambitions.

The airline is lucky to have an indulgent parent that has pledged unconditional support in spite of a very bad year. Hong Kong Airlines is scrapping an all-business class service to London after just six months. It has been rapped on the knuckles by Hong Kong’s aviation regulator. Its poor handling of weather-related disruptions last month resulted in a huge backlog of very angry passengers. 

The carrier has admitted it may have to abandon its already long delayed plan for a public listing in the territory. It has even incurred the wrath of animal rights groups along the way.

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Its struggles in part illustrate the difficulty of breaking the domination of local flag carrier Cathay Pacific Airways and its affiliate Dragonair, which together account for around half of the traffic out of the world’s third busiest passenger airport. But its recent woes also put the focus on its opaque parent’s ability to keep a tight rein on a fast expanding global empire.

Hong Kong Airlines has launched routes in the past that industry experts consider to be non-mainstream and unlikely to attract sufficient demand, says an aviation analyst who requests anonymity because Hong Kong Airlines is a privately held company. “It is a mystery how the parent group keeps funding these failed experiments,” he says.

HNA’s main shareholder is the provincial government of China’s Hainan Island. Despite the state’s backing, there are concerns about the financial health of the group because of an aggressive acquisition strategy that has included investments in emerging markets airlines and a $2.5bn purchase of General Electric’s container leasing unit last year.

27/08/2012  :  Enid Tsui / Financial Times.

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