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Bankruptcy sought for East Star Airlines

SIX aviation companies, including General Electric Co's aviation subsidiary, have appealed to a Hubei court to declare a Chinese airline carrier bankrupt.

East Star Airlines, based in the capital Wuhan City of Hubei Province, owes 500 million yuan (US$73.1 million) to other companies, including the six complainants, the West China City Daily reported today. East Star was told to suspend its services last Sunday because of unpaid loans.

The company was forced to halt flights last Sunday after a request by local government that it suspend its services because of huge unpaid loans caused by mismanagement and an overall travel slump amid global economic turmoil.

The daily expenses of East Star after its flights were halted were nearly one million yuan including aircraft rentals and salaries. The company owes over 60 million yuan to Hubei Airport Group, an official of the group said.

Two million yuan in salaries remains unpaid to the pilots. About 1000 ground staff are also unpaid.

Lan Shili, the director of East Star, was caught in Zhuhai Sanzhao Airport in Guangdong Province by local police when he was about to flee the country last Sunday.

He is now under police supervision in Wuhan, the report said.

After East Star suspended its operations, Air China Group, the parent firm of Air China Co, planned to purchase its business, but a spokesman for the company today said it has not reached an agreement with the group on the acquisition.

Zhou Yongqian, the general manager of East Star, refused to comment.

The country's private carriers are particularly affected by the economic slowdown, since they cannot rely on the huge government bailouts that several state-run carriers are now seeking.

China's first private airline, Okay Airways, began a planned one-month suspension of passenger services last December after airports insisted on cash for its fuel.


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