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East Star Airlines Chairman Under House Detention

03-19 13:19 Caijing

East Star Airlines Chairman was detained by police at Zhuhai Airport in the southern province of Guangdong and currently under house detention.

By staff reporter Zhang Na

 

(Caijing.com.cn) Lan Shili, founder and chairman of private carrier East Star Airlines Co., whose flights were suspended by the civil aviation regulator earlier this month, is currently under house detention, a person familiar with the matter said.

 

Lan Shili

The person told Caijing that Lan was detained by police at Zhuhai Airport in the southern province of Guangdong as he tried to flee overseas to avoid “debt problems.”

 

East Star owes more than 60 million yuan in overdue fees to Hubei Airport Group, according to a senior official with the airport operator. The private airline is headquartered at Wuhan Airport, one airport under the group’s management.

 

The Civil Aviation Administration of China grounded East Star on March 15 at the request of the Wuhan government.


A local transport official told Caijing earlier that the Wuhan government was acting on a complaint from GE Commercial Aviation Services (GECAS) over unpaid leasing fees, but did not disclose the amount owing. East Star rents its entire fleet, meaning the default could spur creditors to repossess the aircraft at any time.

 

In 2005, East Star leased ten A320 jets from GECAS, and planned to fund the project with a 6 billion yuan, 15-year loan from a European bank. East Star is supposed to pay GECAS US$300,000 in rent every month.


Shenzhen Airport and Hangzhou Xiaoshan Airport, in the eastern province of Zhejiang, also said earlier they would take action against East Star to recover overdue fees.

While unpaid bills may have been the immediate cause of the airline’s suspension, regulators have long been wary of East Star’s financial issues – and its capricious refusal to entertain a long-term solution to its problems.

Earlier this month, East Star pulled out of a proposed takeover by Air China, provisionally agreed in January. The Wuhan-based carrier cited “cultural incompatibility” for rejecting the deal, saying that differences in outlook with the much larger flag carrier would make it difficult to reach a “consensus.”

East Star was founded in May 2005 as China’s fourth private carrier after Okay Airways, United Eagle Airlines and Spring Airlines. It operated seven Airbus A320 and three A319 aircraft over 20 passenger routes.

 

Full article in Chinese: http://www.caijing.com.cn/2009-03-17/110123082.html

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