Hong Kong Airlines shareholders have demanded to see 2018 accounts before considering providing at least HK$2 billion (US$255 million) needed to ensure the carrier - part owned by the indebted HNA Group - keeps its licence, two sources said.
The demand came at a tense extraordinary shareholder meeting last week and at which former majority owner HNA did not speak at all, the sources said of the discussion, which has not previously been reported.
Shareholders questioned the airlines' dealings with other HNA firms, including querying the prices paid to lease planes from affiliates as well as the cost of materials bought from them, the sources said, declining to be identified as the information was not public.
Hong Kong Airlines said, as a private company, it does not comment on its financial activities. HNA declined to comment.
Just weeks earlier, Hong Kong's Air Transport Licensing Authority (ATLA) demanded the airline detail plans to improve finances. ATLA declined to comment further on Friday.
ALTA's demand came after a travel insurer in January dropped protection against the airline's collapse, prompting the airline to reassure customers it was operating as normal. A month before, the airline suffered a series of executive departures.
Meanwhile, the formerly acquisitive HNA - a planes-to-banking Chinese conglomerate - has been working to improve finances since China cracked down on aggressive debt-fuelled foreign dealmaking began in mid-2017.
At that point, a US$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.
At last week's meeting, Hong Kong Airlines executives told shareholders that without fresh funds, the airline's operating licence was at risk, said the people familiar with the matter.
Executives then discussed raising HK$2 billion via share placements, the people said. Such a move would significantly dilute the holdings of shareholders if they do not participate.
Major shareholders include Chinese private equity firm Frontier Investment Partner with about 34 per cent, and Zhong Guosong, a former executive and director of the airline, at about 27 per cent.
HNA cut its stake in the carrier two years ago and currently owns 29 per cent through Hainan Airlines, its mainland flagship airline and China's fourth-largest carrier.
Meeting attendees demanded to see the airline's accounts for 2018 including details of interactions with other HNA firms before considering whether they would participate in the share placements, the people said.
The airline also told shareholders that it swung to a loss of about HK$3 billion last year, the people said. In 2017, it booked profit of HK$759 million, showed accounts for that year seen by Reuters.
The 2017 accounts showed signs of rising financial strain, including a 50 per cent jump in trade receivables - money due but not received - while revenue rose only 11 percent. Payments owed to the airline by HNA companies more than doubled to HK$1.3 billion, or 73 per cent of total receivables.
The airline also held stock of four unlisted HNA affiliates, worth US$367 million at the end of 2017, and had outstanding loans at that point of US$300 million extended to two other HNA firms.