Cathay Pacific (CX, Hong Kong International) has delayed the first payment to Hong Kong Airlines (HX, Hong Kong International) for its LCC subsidiary HK Express (UO, Hong Kong International) due to concerns related to the acquisition of three B747-400(F)s by the former carrier, Forbes has reported.

Cathay Pacific was due to pay HKD1.2 billion Hong Kong dollars (USD153 million) to Hong Kong Airlines by May 8.

Sources said that Cathay Pacific told HK Express to first dispose of the Boeing freighters which it bought under circumstances which became a subject of a civil lawsuit. Proceedings in the US District Court for the Southern District of New York, related to a lawsuit filed in 2009 and withdrawn in 2015, revealed that a US businessman Bharat Bhise, CEO of Bravia Capital, arranged to pay a USD1 million commission to an intermediary in Japan as a part of the transaction.

The case never proceeded to trial. The commission to the Japanese intermediary was also not ultimately paid.

Bravia was tasked by HNA Group to source the three B747-400s from ANA - All Nippon Airways (NH, Tokyo Haneda) and arrange their conversion into freighters to grow the group's cargo business. HK Express continues to own at least two of the three B747-400(F)s, even though they were never registered in Hong Kong and are currently operated by Turkey's AirACT (9T, Istanbul Atatürk), formerly known as ACT Airlines, which is 49%-owned by HNA Group. The third aircraft is operated by another HNA unit, Suparna Airlines (Y8, Shanghai Hongqiao), although its ownership status is unclear. All three aircraft were ultimately financed by CDB Aviation.

The aircraft were reportedly placed with HK Express as part of group strategy but were never intended for the airline as such. HNA Group is notorious for a complex web of cross-ownership and intertwined asset ownership which makes divestment of individual airlines units very complicated.

HNA Group has reportedly asked Avolon, in which it owns a 70% stake through Bohai Capital, to buy the three B747-400(F)s from HK Express but the lessor refused due to the low market value of the freighters.

According to the ch-aviation fleets module, the aircraft in question are most likely TC-ACF (msn 25645) and TC-ACG (msn 25641) currently operated by AirACT on behalf of Saudia (SV, Jeddah International) and B-2437 (msn 25207) operated by Suparna Airlines.

The Hong Kongese flag carrier said in a statement that it still intends to complete the acquisition of HK Express by the end of 2019. In March, the airline announced it would buy the LCC for a total consideration of HKD4.93 billion Hong Kong dollars (USD628 million).