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Private airline suspends operation for financial problems

(Xinhua)
Updated: 2009-03-15 15:13

East Star, one of China's private airlines, was ordered to suspend flights as of Sunday because of prolonged financial and management problems, said the local government.

The order was issued by the General Administration of Civil Aviation of China (CAAC)'s branch in charge of the country's central and southern areas after the government of Wuhan City, capital of Hubei Province, submitted an application for the suspension, the municipal government said in a statement.

Related readings:  China's private airline resumes flights  Air China to close East Star deal this month

Because of East Star's unpaid debts and weak management, the city government applied to suspend the company's business "in an effort to safeguard the security of people's lives and assets", the statement read.

The airliner had failed to pay due plane rental fees to GE Commercial Aviation Services (GECAS), forcing the American firm to seek help from the local government and start legal actions, the municipal traffic committee told Xinhua.

Aviation authorities were arranging other carriers to help transport passengers holding East Star tickets.

East Star, based in Wuhan, flew its first flight on May 19, 2006 and operated about 20 domestic passenger routes. It held about 10 percent of the market share in Wuhan.

China National Aviation Holding Company, the parent firm of Air China, was considering buying East Star, which could help its competitiveness in the central part of the country against major rivals China Southern and China Eastern, who have market share of 40 percent and 20 percent, respectively, in the city.

However, East Star has not made any positive response to the purchasing bid so far.

The city government has set up a team to deal with the flight suspension and purchase affairs.