Report by : Gan Yung Chyan
/ KUCINTA SETIA
Distributed to All Press & Travel Professionals
It is reported that Cathay Pacific has initially looked for HNA Group to discuss the dilemma of saving Hong Kong Airlines, but it was rejected by HNA.
Recently, Hong Kong Airlines, which has been plagued by financial problems, is rumoured to be looking for new investors to “pump water”, which is favoured by Cathay Pacific. However, according both parties could not sit down and discuss. According to China Business News, Cathay Pacific has taken the initiative to find HNA to save Hong Kong Airlines, but HNA has clearly rejected it.
According to China Business News, Hong Kong Airlines, a subsidiary of HNA Group, is negotiating with various parties, including its direct competitor, Cathay Pacific in the Hong Kong market. Sources close to Hong Kong Airlines revealed to the newspaper that there are indeed some strategic investors who are interested in cooperation with Hong Kong Airlines, and have initiated initial contacts, but have not reached an in-depth cooperation agreement so far. Hong Kong Airlines does not have equity cooperation with Cathay Pacific.
It is still unclear whether Cathay Pacific’s “bonfire” intends to ensure Hong Kong’s aircraft carrier’s return to HNA’s prospects or is an equity-takeover.
China Business News pointed out that the content of negotiations between HNA and Cathay Pacific includes a series of aspects such as network coordination and equity cooperation. In fact, HNA's Hong Kong Airlines and Hong Kong Express are the most direct competitors of Cathay Pacific in the Hong Kong market. If HNA wants to join the oneworld, it needs to deal with how Cathay is competing with the Hong Kong market.
Hong Kong Airlines has financial difficulties recently. A $550 million (about HK$4.3 billion) bond will expire on 20 January 2019, but it has recently turned around. Hong Kong Airlines has been supported by the China Development Bank (CDB). The bank provided debt refinancing to ease its short-term financial crisis. As the largest lender of HNA Group, CDB has the opportunity to lend to HNA, and then HNA will make arrangements for repayment of Hong Kong Airlines' debts.
The Hong Kong Airlines' financial crisis was triggered by the resignation of several directors of Hong Kong Airlines and the rapid interest rate of bonds. Hong Kong Airlines has a $550 million bond due on 20 January 2019. At the beginning of the month, the interest rate once rose to 717.568 PCT and the lowest bond price has seen 79.65 US dollars. After the news of the interest rate hike, the bond price regained the level of more than 90 US dollars, and the yield dropped sharply to 242.711 PCT.
HNA was originally the controlling shareholder of Hong Kong Airlines, but HNA suddenly announced last year that it would transfer part of the shares of Hong Kong Airlines for many years to an independent third party Frontier InvestmentPartner. At present, Hainan Airlines holds a 27 per cent stake in Hong Kong Airlines.
On the critical juncture, Hong Kong Airlines has been supported by the "national team". In November 2017, Hong Kong Airlines pledges the shares of the company to the Export-Import Bank of China in exchange for 100 million US dollars. In December 2017, the bank reached a loan agreement with Hong Kong Airlines that obtained the funds needed from to purchase four Airbuses. Recently, the city’s national bank started to support Hainan Airlines and provided debt refinancing.
In addition, Hong Kong Airlines announced on its official website on 9 January 2019 that the company has been and will continue to operate as usual. It is expected that during the Lunar New Year holidays (1 to 10 February 2019), it will operate nearly 1080 flights and carry more than 224,000 passengers to achieve a year- by-year growth of 4.2 per cent.
/ KUCINTA SETIA
Distributed to All Press & Travel Professionals
It is reported that Cathay Pacific has initially looked for HNA Group to discuss the dilemma of saving Hong Kong Airlines, but it was rejected by HNA.
Recently, Hong Kong Airlines, which has been plagued by financial problems, is rumoured to be looking for new investors to “pump water”, which is favoured by Cathay Pacific. However, according both parties could not sit down and discuss. According to China Business News, Cathay Pacific has taken the initiative to find HNA to save Hong Kong Airlines, but HNA has clearly rejected it.
According to China Business News, Hong Kong Airlines, a subsidiary of HNA Group, is negotiating with various parties, including its direct competitor, Cathay Pacific in the Hong Kong market. Sources close to Hong Kong Airlines revealed to the newspaper that there are indeed some strategic investors who are interested in cooperation with Hong Kong Airlines, and have initiated initial contacts, but have not reached an in-depth cooperation agreement so far. Hong Kong Airlines does not have equity cooperation with Cathay Pacific.
It is still unclear whether Cathay Pacific’s “bonfire” intends to ensure Hong Kong’s aircraft carrier’s return to HNA’s prospects or is an equity-takeover.
China Business News pointed out that the content of negotiations between HNA and Cathay Pacific includes a series of aspects such as network coordination and equity cooperation. In fact, HNA's Hong Kong Airlines and Hong Kong Express are the most direct competitors of Cathay Pacific in the Hong Kong market. If HNA wants to join the oneworld, it needs to deal with how Cathay is competing with the Hong Kong market.
Hong Kong Airlines has financial difficulties recently. A $550 million (about HK$4.3 billion) bond will expire on 20 January 2019, but it has recently turned around. Hong Kong Airlines has been supported by the China Development Bank (CDB). The bank provided debt refinancing to ease its short-term financial crisis. As the largest lender of HNA Group, CDB has the opportunity to lend to HNA, and then HNA will make arrangements for repayment of Hong Kong Airlines' debts.
The Hong Kong Airlines' financial crisis was triggered by the resignation of several directors of Hong Kong Airlines and the rapid interest rate of bonds. Hong Kong Airlines has a $550 million bond due on 20 January 2019. At the beginning of the month, the interest rate once rose to 717.568 PCT and the lowest bond price has seen 79.65 US dollars. After the news of the interest rate hike, the bond price regained the level of more than 90 US dollars, and the yield dropped sharply to 242.711 PCT.
HNA was originally the controlling shareholder of Hong Kong Airlines, but HNA suddenly announced last year that it would transfer part of the shares of Hong Kong Airlines for many years to an independent third party Frontier InvestmentPartner. At present, Hainan Airlines holds a 27 per cent stake in Hong Kong Airlines.
On the critical juncture, Hong Kong Airlines has been supported by the "national team". In November 2017, Hong Kong Airlines pledges the shares of the company to the Export-Import Bank of China in exchange for 100 million US dollars. In December 2017, the bank reached a loan agreement with Hong Kong Airlines that obtained the funds needed from to purchase four Airbuses. Recently, the city’s national bank started to support Hainan Airlines and provided debt refinancing.
In addition, Hong Kong Airlines announced on its official website on 9 January 2019 that the company has been and will continue to operate as usual. It is expected that during the Lunar New Year holidays (1 to 10 February 2019), it will operate nearly 1080 flights and carry more than 224,000 passengers to achieve a year- by-year growth of 4.2 per cent.
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