Hong Kong Airlines (HKA) ex-director Zhong Guosong has been appointed its chairman as part of a board expansion aimed at turning around the struggling company, formerly controlled by heavily-indebted Chinese conglomerate HNA Group.
The move hands effective control of the airline to Zhong and Chinese private equity firm Frontier Investment Partner who hold stakes of about 27 and 34 percent, respectively. HNA, which cut its stake two years ago, holds about 29 percent.
The two controlling shareholders have appointed a group of directors including Zhong, they said in a statement on Tuesday.
The statement added that the moves were taken with “the sole objective of safeguarding the future of HKA which is currently under serious financial stress.”
Earlier this month, Hong Kong Airlines executives told shareholders the company needed to raise at least HK$2 billion ($255.12 million) or risk losing its operating licence. Investors reacted angrily at that meeting, Reuters reported last week, and questionedHong Kong Airlines‘ dealings with other HNA affiliates and demanded the company provide full 2018 figures before they consider providing fresh capital. The new board plans to bring in independent investigators to review the company accounts as well as its interactions with other HNA firms, according to an internal memo seen by Reuters.
The memo added that the new board would work with existing management and the changes would not impact the company’s day-to-day operation.
Hong Kong Airlines and HNA did not immediately respond to emailed requests for comment.
Hong Kong Airlines, the city’s third largest airline, has been cutting back on its long-haul operations, recently reducing the number of flights per week it offered to cities including Vancouver, San Francisco and Los Angeles, according to the airline’s scheduling information.
In mid-March, Hong Kong‘s Air Transport Licensing Authority (ATLA) demanded the airline detail plans to improve its finances. ATLA said in a statement late on Monday it had asked the company to provide further clarification on those plans.
At the shareholder meeting earlier this month, shareholders were told the carrier had swung to a loss of about HK$3 billion last year. In 2017, it booked profit of HK$759 million, according to accounts seen by Reuters.
HNA remained silent during the shareholder meeting, sources told Reuters. The formerly acquisitive group has been working to improve its own finances since mid-2017 when China cracked down on aggressive foreign dealmaking.
At that point, a $50 billion spree had netted HNA assets including the single largest stake in Deutsche Bank. It has since been selling off holdings, including low-cost carrier Hong Kong Express Airways last month.