Economy

Airline sues agency for questionable grounding

(China Daily)
Updated: 2011-05-10 15:10

GUANGZHOU - The parent company of a bankrupt Chinese private airline sued the government's aviation agency on Monday for what it deemed to be an improper grounding of the company's planes.

The company said that decision led to its bankruptcy following the 2008 global financial crisis.

A court in South China's city of Guangzhou heard the case, which is being directed by the East Star Group against the Civil Aviation Administration's Central and Southern Administration. The group is the parent company of East Star Airlines, which went bankrupt in August 2009 after a restructuring plan failed to keep the company afloat.

The case marks the first time that a Chinese court has heard a case in which a private airline has questioned the government's orders.

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After being battered by the financial crisis, East Star Airlines was deep in debt. Even so, on March 12, 2009, it rejected a takeover initiated by the government and attempted by the parent group of the national flag carrier Air China. That was just three days before its planes were grounded by regional civil aviation authorities.

The plaintiff said the grounding was improper and baseless, since the airline passed annual safety tests conducted at the end of 2008.

The aviation agency responded by saying that East Star Airlines had raised serious safety concerns. The agency said the airline's planes were flown too frequently and its pilots were unqualified. The agency cited the Law on Work Safety as its legal base for the grounding, saying that the measure was intended to counter a serious safety threat.

The court adjourned without giving a verdict on Monday.

East Star was founded in May 2005, making it the fourth private carrier in China after Okay Airways, United Eagle Airlines and Spring Airlines. It operated more than 20 domestic passenger routes between key cities, using a fleet of nine aircraft, and held about 10 percent of Wuhan's aviation market share.

The airline, which has registered capital worth 80 million yuan ($12.3 million), owed a debt of more than 752 million yuan when it filed for bankruptcy.

Xinhua