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Troubled Hong Kong Airlines allowed to keep operating

Hong Kong has seen six months of protests which has dealt a massive blow to the tourism sector and airline operators (AFP Photo/ANTHONY WALLACE)

Cash-strapped carrier Hong Kong Airlines was handed a lifeline by regulators on Saturday after they decided not to punish it for delaying salary payments amid an ongoing financial crisis.

The international finance hub has seen six months of protests which has dealt a massive blow to the tourism sector and airline operators.

Hong Kong Airlines is owned by struggling Chinese conglomerate HNA Group, which has been looking to lower its debt burden.

Last month the carrier announced it would delay salary payments to some staff as it struggled to find cash, triggering a warning from regulators that their license might be at risk.

But earlier this week, the company announced it had found a last minute injection of funds.

"The Civil Aviation Department has been satisfied that Hong Kong Airlines is able to continue to operate properly and safely," a spokesman for the Hong Kong Civil Aviation Department said on Saturday.

The city's Air Transport Licensing Authority (ATLA) said on the same day that the airline has met the conditions for raising and maintaining its cash level.

The authority added that it will continue to monitor the carrier's operation closely.

In late November, the carrier said its business was "severely affected" by the social unrest in the city and a sustained weak travel demand, which also impacted its payroll.

The licensing authority later required the airline to raise a significant amount of funds within a deadline in order to prevent its financial situation from deteriorating and to protect public interests.

Earlier this year, HNA unloaded budget carrier HK Express to rival Cathay Pacific and cut some operations.

On Wednesday, in a letter to staff and colleagues, the carrier's chairman Hou Wei said "an initial cash injection plan has been drawn up."

Although the amount of cash was not disclosed, the chairman said the company would pay outstanding salaries to staff on Thursday and the airline's services will gradually return to normal as soon as the funds arrive.

The tourism industry in Hong Kong has been battered by nearly six months of pro-democracy protests that have become increasingly violent.

Visitor arrivals have tanked with arrivals from the Chinese mainland plummeting, hammering retail sales and helping to tip the city into recession.