Hong Kong Airlines faces more uncertainty as chairman challenges his removal (updated)

CWT International

17/04/2019 14:34

(Adds opposing shareholders' response; HNA no comment
background)
    By Jennifer Hughes and Kane Wu
    HONG KONG, April 17 (Reuters) - Hong Kong Airlines,
partially owned by China's HNA Group, was thrown into deeper
uncertainty on Wednesday after Hou Wei disputed a decision that
removed him as chairman and said he was still in charge of the
struggling carrier.
    Former Hong Kong Airlines director Zhong Guosong announced
on Tuesday he had been appointed chairman after a shareholder
meeting where he and Chinese private equity firm Frontier
Investment Partner, who together control about 61 percent of the
shares, voted in additional board members, including Zhong as
chairman.  urn:newsml:reuters.com:*:nL3N21Y2C1
    Hou Wei joined Hong Kong Airlines in September last year,
having previously worked for units of HNA's Hainan Airlines,
China's fourth-largest carrier. 
    Referring to himself as chairman of the airline, Hou on
Wednesday challenged the decision to remove him. In an internal
letter sent to employees and shown to Reuters by Hong Kong
Airlines, Hou said the board changes were a result of a
shareholder dispute and would not have any impact on the
company's operations.
    "I will continue to work hand in hand with our leadership
team to take concrete actions to secure Hong Kong Airlines’
future," Hou said.
    Hong Kong Airlines Consultation Service Co., which Zhong
controls, and Frontier responded by saying that the April 16
meeting was conducted legitimately under proper procedures
supported by multiple legal opinions.
    "These steps were taken to secure the financial future of
Hong Kong Airlines and stop further related party transactions
and any embezzlement of company assets amid a period of
significant financial stress and reports of serious financial
misappropriation," said the two.
    HNA, which holds about 29 percent of the carrier, declined
to comment.
    The dispute follows another shareholder meeting earlier this
month where Hong Kong Airlines executives told investors the
company needed to raise at least HK$2 billion ($255.12 million)
or risk losing its operating license. 
    The shareholders reacted angrily, Reuters reported last
week, and questioned Hong Kong Airlines' dealings with other HNA
affiliates, demanding the company provide full 2018 financial
figures before they would consider providing fresh capital.
 urn:newsml:reuters.com:*:nL8N21T2QY
    Formerly acquisitive HNA - a planes-to-banking Chinese
conglomerate - has been working to improve its finances since
China cracked down on aggressive debt-fuelled foreign dealmaking
in mid-2017.
    By that point, a $50 billion spree had netted HNA assets
including the single largest stake in Deutsche Bank. It has
since been reducing its portfolio and last month sold low-cost
carrier Hong Kong Express Airways.
    On Tuesday, HNA unit CWT International Ltd  0521.HK  said it
had defaulted on a HK$1.4 billion ($179 million) loan and had
less than 24 hours to pay funds due or lose assets pledged as
collateral.  urn:newsml:reuters.com:*:nL3N21Y1A0
    

 (Reporting by Jennifer Hughes, Kane Wu and Julie Zhu; Editing
by Muralikumar Anantharaman and Kirsten Donovan)
 ((kane.wu@thomsonreuters.com; +85228436590; Reuters Messaging:
kane.wu.thomsonreuters.com@reuters.net))