April 18, 2019 / 10:33 AM / a month ago

Hong Kong Airlines power struggle deepens amid allegations head office 'stormed'

HONG KONG (Reuters) - A power struggle at Hong Kong Airlines (HKA) intensified on Thursday as a group of shareholders accused a rival group representing indebted Chinese conglomerate HNA of storming the troubled airline’s head office and taking away documents.

FILE PHOTO: A Hong Kong Airlines Airbus A330-300 passenger plane taxies on the tarmac at the Hong Kong Airport September 11, 2013. REUTERS/Tyrone Siu/File Photo

Both groups also again staked claim to the chairmanship of the carrier.

Former HKA director Zhong Guosong and Chinese private equity firm Frontier Investment Partner, who together control about 61 percent of the airline, said in a statement that “HNA Group representatives stormed” the carrier’s office early on Thursday morning.

“It is believed that HKA’s key financial information and hard disks were taken away or destroyed, with the specific losses still unknown,” they said, adding the move took place in spite of an agreement between the two sides reached late on Wednesday to not remove documents.

However, HKA said via a spokesman: “No one broke into our headquarters or took away any company document this morning.”

HNA, which holds about 29 percent of HKA, did not immediately respond to a request for comment.

Around eight security guards were visible in the lift lobby outside HKA’s head office, and in reception, when Reuters visited on Thursday afternoon. They declined to say who they worked for.

Multiple HKA staff approached by Reuters outside the head office declined to comment. Two, however, said that “all is normal” at the airline.

In a statement, HKA said: “The recent dispute among the company’s shareholders has seriously disrupted the order and operation of our office. As a result, we had to hire third-party security personnel and lawyers to assist us in dealing with the situation.”

The power struggle first went public on Tuesday when Frontier and Zhong, who hold 34 and 27 percent of HKA, respectively, said they had held an extraordinary shareholder meeting where they removed the existing directors and installed Zhong, already chairman of sister airline Hong Kong Express, as chairman.

This was disputed on Wednesday by Hou Wei, who is still listed on HKA’s website as chairman and who said in a memo to staff that he was still in charge of the airline.

Hou joined Hong Kong Airlines in September last year following more than four years with HNA’s Hainan Airlines, according to his LinkedIn profile. Hainan Airlines is China’s fourth largest carrier.

The fight comes as HKA is struggling to survive. Earlier this month, executives warned shareholders the company needed at least HK$2 billion ($255 million) or risk losing its operating license - and that it swung to a loss of about HK$3 billion last year.

Zhong and Frontier representatives at that meeting, however, demanded details of the 2018 accounts and questioned the close ties between HKA and HNA, which cut its controlling stake in the Hong Kong carrier in 2017.

Zhong and Frontier said on Thursday that the two sides had agreed that security personnel appointed by them could remain in the offices to safeguard documents and that executives promised to not destroy or remove information or data, or remove it from the office.

The two shareholders, who maintained that Zhong is chairman, added that they were “fully committed to exercising every possible legal means they have to act” to protect the interests of the airline’s employees, customers and business partners.

Reporting by Julie Zhu, Kane Wu, Alun John and Shellin Li; Additional reporting by Jennifer Hughes; Editing by Muralikumar Anantharaman

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