Arab Press

بالشعب و للشعب
Friday, Aug 22, 2025

United Airlines’ $300 Million Skeleton In The Closet: Hong Kong Route Impairment

United Airlines’ $300 Million Skeleton In The Closet: Hong Kong Route Impairment

While United Airlines wants to look past its Continental Airlines merger, it appears to be dealing with an even older matter: writing down the value of the Asia-Pacific network it acquired in 1985 from Pan Am, which gave United the dominant position in the region it still enjoys today.
United has taken a $296 million impairment on its Hong Kong routes in two tranches, first a $206 million charge announced in January 2019 – before the civil disruption in Hong Kong that is seeing airlines post losses but not make write-downs. The first tranche was blamed on costs rising faster than revenue. The second tranche, of $90 million, was announced in early January 2020 and represented a full impairment of the Hong Kong route. It was blamed on decreased demand and revenue.

Hong Kong was one of thirteen Asia-Pacific destinations United bought, along with 18 widebody aircraft, from Pan Am for $750 million in 1985, equivalent today to $1.8 billion after inflation. The transaction also included parts, property and facilities. United declined to comment if it still attributes value to any of the twelve other markets it bought.

To simplify the cost by ignoring the transaction’s large aircraft expense, each destination on average was worth $58 million, or $138 million today after inflation, far below United’s $296 million impairment. Yet is unclear why United kept such high value for so long. United’s Asia-Pacific network historically generated healthy profits that should have gradually written down the transaction value. Pan Am’s Asia-Pacific network made $132 million in the two years prior to its sale.

United said the Hong Kong routes were valued as an intangible asset part of collateral for a loan. The asset classification seems questionable given the commercial and legal evolution of international aviation as it pertains to two areas, traffic rights and slots.

First, traffic rights: United bought Pan Am’s Asia-Pacific network at a time of heavy regulation when countries only allowed a specific number of airlines and flights – thus creating value to the route authority. Since then the US has championed open sky agreements, a sweeping change that permit an unlimited number of airlines from either side to offer as many flights as they wish.

The US and Hong Kong removed restrictions on passenger flights in 2002, liberalizing the market and permitting any US or Hong Kong airline to fly as much as it wants. That should have meant United’s Hong Kong assets lost all value; United no longer had any access another US airline could not gain.

Whereas United in 1985 bought further route access to Hong Kong, American Airlines last decade used free market access to launch two Hong Kong flights. United declined to comment about impairment methodology and why the valuation remained for so long. United’s first impairment said it was done as part of its annual review.

Second, slots: United has not indicated the valuation was related to Hong Kong airport slots, but either way this could not be possible. Aviation growth outpacing infrastructure expansion has made more airports slot congested. Perhaps best known is London Heathrow, where airlines can legally sell their slots to each other. The most expensive known sale was Oman Air spending $75 million for a slot pair at peak timings. Those transaction opportunities can allow airlines to value their Heathrow slot portfolio.

But slots at Hong Kong cannot be sold. Official rules only permit trading between an airline and its subsidiaries (for example, Cathay Pacific and Cathay Dragon), or between subsidiaries (Cathay Dragon and HK Express). So without being able to sell its slots at congested Hong Kong, United could not ascribe value to the slots. Other Asian airports also tend to prohibit slot sales, unlike European and American counterparts.
Besides Hong Kong, United’s Pan Am transaction included access to Auckland, Bangkok, Beijing, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Thailand and Tokyo. United already served Hong Kong and Tokyo, but the Pan Am deal gave it more exposure. The markets have all since become open skies with the exception of mainland China and Tokyo Haneda.

The US assigns airlines to the limited permissions to land in mainland China and at Tokyo Haneda. Approval is given to an airline for a specific city-pair combination, and the airline needs permission if they want to later change it. Alternatively the authority can be re-allocated to another airline, as happened to a Delta Haneda slot that was re-allocated to American. Being unable to freely transfer an authority would also challenge the ability to provide a valuation on those flights.
Newsletter

Related Articles

Arab Press
0:00
0:00
Close
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Miles Worth Billions: How Airlines Generate Huge Profits
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
Beijing is moving into gold and other assets, diversifying away from the dollar
Trump Backs Putin’s Land-for-Peace Proposal Amid Kyiv’s Rejection
Zelenskyy to Visit Washington after Trump–Putin Summit Yields No Agreement
Iranian Protection Offers Chinese Vehicle Shipments a Cost Advantage over Japanese and Korean Makers
United States Sells Luxury Yacht Amadea, Valued at Approximately $325 Million, in First Sale of a Seized Russian Yacht Since the Invasion of Ukraine
Saudi Arabia accelerates renewables to curb domestic oil use
Cristiano Ronaldo and Georgina Rodríguez announce engagement
Asia-Pacific dominates world’s busiest flight routes, with South Korea’s Jeju–Seoul corridor leading global rankings
Private Welsh island with 19th-century fort listed for sale at over £3 million
Sam Altman challenges Elon Musk with plans for Neuralink rival
Australia to Recognize the State of Palestine at UN Assembly
The Collapse of the Programmer Dream: AI Experts Now the Real High-Earners
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
British Tourist Dies Following Hair Transplant in Turkey, Police Investigate
WhatsApp Users Targeted in New Scam Involving Account Takeovers
Trump Deploys Nuclear Submarines After Threats from Former Russian President Medvedev
Germany’s Economic Breakdown and the Return of Militarization: From Industrial Collapse to a New Offensive Strategy
Germany Enters Fiscal Crisis as Cabinet Approves €174 Billion in New Debt
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
AI Raises Alarms Over Long-Term Job Security
Russia Formally Recognizes Taliban Government in Afghanistan
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Mediators Edge Closer to Israel-Hamas Ceasefire Agreement
Germany Seeks Taliban Deal to Deport Afghan Migrants
Emirates Airline Expands Market Share with New $20 Million Campaign
Robots Compete in Football Tournament in China Amid Injuries
×