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Hong Kong Airlines seeks $12 million of damages from shareholder and permission to restructure

It is unusual for a company to seek damages from its own shareholder, but the ownership dispute at Hong Kong Airlines is anything but ordinary. Management is pushing for a resolution and legal permission to restructure the airline as the conflict amongst HNA Group factions risks exceeding four months in a weakening business environment.

Hong Kong Airlines requested an initial HK$95 million (US$12.1m) in damages at Hong Kong’s High Court on June 5. The fortification is sought from two of its shareholders that proclaimed a boardroom coup in April and then filed injunctions against management and other parties.

The $12.1m figure is expected to rise as the proceedings head for a hearing in July about the injunction, and a two-day hearing in August to determine the airline’s lawful shareholders. The court may not make a determination right away, potentially stretching the dispute over four months. Executives have been limited to only make ordinary day-to-day decisions rather than restructure the loss-making airline that recently mounted long-haul expansion, including to Los Angeles and San Francisco.

Urgency is mounting. Hong Kong Airlines does not disclose monthly performance, but local rival Cathay Pacific is seeing operating conditions weaken. Cathay said its most recent passenger yields, for April, declined and “such yield pressure is expected to continue in the coming months”. Air freight declined in volume and yield, and Cathay warned both metrics are “expected to remain difficult for the foreseeable future.”

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