East Star Airlines, a debt-laden privately-owned Chinese airline, officially went bankrupt last week after a long and desperate fight to stay aloft.
The Intermediate People’s Court in East Star’s hometown of Wuhan said a plan submitted by the East Star Group and ChinaEquity was unfeasible and failed to meet the conditions for a legal restructuring.
East Star, founded in 2005 by a travel agency and a real estate company both owned by the East Star Group, at its peak accounted for 10% of market share in Wuhan, in central China. It was China’s fourth private airline.
It foundered on rising debt, tough competition for passengers and a drop in air travel as the economy stumbled last year. Its total debt surpassed RMB752 million ($110.1 million). Earlier this year, Caijing reported Lan Shili, founder and chairman of private carrier East Star Airlines, seen in the picture, was placed under house arrest over financial irregularities.
East Star was grounded by the industry regulator on March 15 after rejecting a takeover offer from Air China’s state parent.
It then launched a dramatic search for a rescuer, at one point in June calling a night-time press conference at which anonymous executives announced a $500 million yuan investment by a firm that did not appear to have a valid street address, which is never an encouraging sign.
Reuters said East Star Airlines had no operating income in 2008.