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Formed in 2005 and started operations in 2006. Domestic, regional, & international, scheduled & charter, passenger & cargo, jet airplane services.
Wuhan Tianhe Airport
430002 Wuhan, (Hubei), China
China (People's Republic of China) was established in 1949, it covers an area of 9,560,980 sq km, its population is 1,265 million, its capital city is Beijing, and its official language is Chinese.
June 2005: The (CAAC) (CAC) awarded an Air Operators Certificate (AOC) to East Star Airlines (ESR).
November 2005: Backed by 4 tourism and property groups. Plans to launch operations in May 2006 to 10 domestic destinations.
East Star Airlines (ESR), a Wuhan-based start up, signed a letter of intent (LOI) for the purchase of 10 A320-200's directly from Airbus (EDS) plus a firm lease deal with GE Commercial Aviation Services (GEF) for an additional 10.
The agreements reportedly are worth $1.48 billion. The 10 purchased airplanes will be delivered in 2009 - 2010. The carrier will begin taking delivery of the leased A320s in the second quarter of next year. All of the airplanes will be powered by (CFM56-5B)s.
"We are very confident that by flying the best-selling airplanes in the world, we will not only ensure a good beginning of profitable operation, but also high standards of service quality for passengers on domestic routes in China," East Star (ESR) Group President, Lan Shili said.
The carrier received operating approval from Chinese aviation authorities in June and intends to begin flying domestically next May. It is the country's fourth private airline.
February 2006: Chinese domestic airlines flew a record 138 million passengers in 2005, a rise of +15% over 2004 and double the number of 2000. The figure is expected to double again in the next five years, according to Gao Geng, the Vice Minister of the General Administration of Civil Aviation in China. Cargo and airmail throughput rose +14% to 3.04 million tons in 2005 and also is expected to double in the next five years. However, profit margins will remain tight within the sector. He noted revenues in the sector had grown to CNY170 billion/$21.09 billion at the end of 2005, but profits in the past five years had amounted to only CNY10 billion.
A320-214 (2674, B-), GECAS (GEF) leased.
April 2006: East Star Airlines (ESR) is a privately owned start-up that aims to operate from its Wuhan base to Beijing, Shanghai, Guangzhou, and Chengdu.
May 2006: East Star Airlines (ESR) operated its first revenue flight from Wuhan to Shenzhen aboard a leased A319. (ESR) is slated to take delivery of 10 leased A320 family airplanes and also has firm orders for 10 purchased A320s to be delivered in 2009 - 2010. Its initial network will comprise Wuhan, Sanya, Shenzhen, Haikou, and Guangzhou.
2 A319-112's (2762, B-6229; 2774, B-6230), (GEF) leased.
May 2007: While several Chinese low-cost carriers (LCC)s have struggled, newcomers East Star Airlines (ESR) and Spring Airlines (CQH) have started strong.
(ESR) reported net earnings of +CNY11.4 million/+$1.5 million on CNY281 million in revenue in its first year of operation, while (CQH) posted a +CNY30 million profit in its recently completed second year.
Industry analysts attributed the pair's success to an "air travel plus tourism" operating model - - both launched travel agencies designed to attract passengers. Recently, (ESR), which operates three A319s at an average 83.1% LF load factor, applied to the (CAAC) (CAC) to fly internationally. "We plan to open new routes to Hong Kong and Macau, and some international routes to Southeast Asia as we have travel branches in these destinations, so we will have no problem attracting passengers," Managing Director, Zhou Yongqian said. The airline intends eventually to list on an overseas stock market, he added.
Generally speaking, China's (LCC)s are having difficulty building up steam. A dearth of attractive slots and difficulties in acquiring new airplanes (orders must go through the government) and finding pilots (FC) are among the most significant hurdles cited by industry analysts. The average (LCC) fleet size is 3 to 4 airplanes.
In China, approximately 70% of commercial traffic is centralized in large cities like Beijing, Shanghai and Guangzhou, where airports are nearly saturated and unavailable to newer (LCC)s. In addition, a shortage of 8,000 to 10,000 pilots (FC) is forecast in the next five years, a concern for carriers that have trouble competing with the majors for new hires.
Despite those problems, (CQH) Chairman, Wang Zhenghua is confident (LCC)s have a place in China's future. "Our target is to make more Chinese people have a chance to enjoy air travel," he said.
August 2007: China's Low Cost Carrier (LCC)s, which are facing a lack of access to trunk routes, restriction on the introduction of new airplanes and pilot (FC) shortages, are experiencing mixed results in their efforts to attract the foreign investors they need to move forward with listing plans. Spring Airlines (CQH) has met with success, sealing a deal with Citibank under which the latter will serve as strategic investor and financial adviser, (CQH) spokesperson, Zhang Lei revealed. The carrier intends to list either in Shanghai or Hong Kong in 2009.
East Star Airlines (ESR), which is profitable, has presented its listing plan to six international investment banks, including JP Morgan and Merrill Lynch, and five additional foreign banks. However, Banque de L'IndoChine graded (ESR) as a "third class" carrier, behind "first class" Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA), and "second class" carriers like Shanghai Airlines (SHA), Shenzhen Airlines (SHZ), and Sichuan Airlines (SIC). It said it would consider an approximately $100 million investment if and when (ESR) is upgraded to "second class."
A320-214 (3215, B-6336), delivery.
September 2007: Lufthansa (DLH) Technik (LTK) signed a five-year, $10 million Total Component Support contract with China's East Star Airlines (ESR) covering its new A320 fleet.
A320-214 (3221, B-6337), (GEF) leased.
October 2007: Wuhan-based, East Star Airlines (ESR) will become the first Chinese low-cost carrier to fly outside the country, announcing the launch of services to Hong Kong and Macau from Wuhan, beginning November 6, that will be followed by planned flights to Singapore and Thailand early next year. The carrier said it is confident it will achieve high loads on the daily services to Hong Kong and Macau. "We can secure high load factors with the support from our travel agency, which can bring 50% of the tourists it attracts on board. That's why we plan to open new routes to Singapore and Thailand early next year, as we also have our travel agency's sales branches in these two countries," Public Relations Director, Pan Yanli explained. "In addition, we will cover the transfer business for passengers who need travel between Taiwan and the Chinese mainland, via Hong Kong, by cooperating with Taiwan-based China Airlines (CHI)." Currently, the average load factor on Wuhan - Hong Kong services operated by China Southern Airlines (GUN) and Dragonair (DRG) floats between 60% and 70%. It has been reported that Shanghai-based, Juneyao Airlines (JYR) also plans to open routes to Southeast Asia next year, according to President, Wang Junjin.
(ESR) President, Lan Shili noted that the carrier is negotiating an engine order valued at CNY3 billion/$400 million with (GE). He predicted the deal will be sealed before year end.
Chinese carriers are beginning to follow the internationally common practice of recruiting privately trained pilots (FC) in an effort to make up for a pilot shortfall that (CAAC) (CAC) Vice Minister, Gao Hongfeng said last month will reach 2,000 over the next two years. The country's commercial aviation fleet numbered 1,067 airplanes at the end of July, and is expected to rise to 1,250 by 2010. Chinese carriers traditionally cover training expenses for their pilots (FC), which normally runs several million yuan for each individual. As a result, pilots (FC) rarely are able to transfer to competing carriers, as the current employer often asks for heavy compensation from a potential new employer. In addition, the rising number of new entrants is exacerbating the problem. Gao said 39 privately run airlines have submitted applications to the (CAAC) (CAC) since 2004, and 17 have been approved so far. (GUN) started the trend in May, announcing its plans to recruit 100 privately trained pilots (FC). Sichuan Airlines (SIC) followed three months later, hiring 50 private pilots (FC). This month Spring Airlines (CQH), (ESR), and United Eagle Air (UEG) disclosed their interest in recruiting such pilots (FC) in the near future. Shenzhen Airlines (SHZ) has taken it one step further, establishing Kunpeng International Flight School (KIFS) with a CNY30 million investment. (KIFS) will award privately trained pilots (FC)an (ICAO)-recognized license on their graduation, and currently has 120 students. That number is expected to leap to 480 next year. Industry analysts have pointed out that privately trained pilots (FC)'s ability to seek new jobs, when their working contracts expire, or are terminated, will help the market mature and constitute a significant step toward solving the shortage.
November 2007: East Star Airlines (ESR), which launched operations from Wuhan last year, said it will purchase six A320s, worth CNY3 billion at list prices, Xinhua (XIH) reported. (ESR) will finance the purchase with loans from Royal Bank of Scotland.
(ESR) became the first privately owned Chinese carrier to operate a regional service, when it successfully launched its daily, Wuhan - Hong Kong - Macau service
December 2007: (ILFC) (ILF) announced a lease deal with East Star Airlines (ESR) for two new A320-200s powered by (CFM56-5B4)s, to be delivered in March and November 2009, under 12-year leases.
A320-214 (3337, B-6350), delivery.
January 2008: East Star Airlines (ESR), the first Chinese (LCC) to fly outside China's mainland by launching services to Hong Kong and Macau from Wuhan last November, sealed a strategic cooperative agreement with Citibank for capital financing and Initial Public Offering (IPO) consultation. It is negotiating with some private funds for going listed in overseas markets.
Industry analysts noted that Chinese (LCC)s have begun to show their competitive edge in the domestic airline industry, but still face significant disadvantages compared to their much larger state-owned rivals.
March 2008: 11 East Star Airlines (ESR) pilots (FC) took "collective leave" due to a labor dispute.
April 2008: A320-214 (3461), (GEF) leased.
June 2008: Struggling Wuhan-based East Star Airlines (ESR), which claimed it is in "financial crisis" last week, was dealt a further blow by the (CAAC) (CAC), which decided to suspend its right to fly to Guangzhou and Shenzhen from July 7. This makes the second time (ESR) has faced such a sanction. Flights to Shanghai were suspended by the regulator last month owing to the airline's inability to submit its "air transport funds" to the (CAC) in time.
An (ESR) insider recently was quoted in Chinese media claiming the airline might cease operations this month, because of its "financial burden." It owed approximately CNY100 million/$14.6 million to China Aviation Oil Import and Export Co, the main domestic oil supplier to Chinese carriers. Following those reports, the oil company agreed to postpone (ESR)'s payment by one month to June 28.
(ESR) spokesperson Pan Yanli, (PR) Director admitted the airline faces "some severe difficulties," including financial problems and a talent shortage. "We do suffer from financial strain, but we are trying our best to solve it," she said, adding that "going listed in order to collect funds" is a possible solution.
October 2008: East Star Airlines (ESR) is a privately owned airline operating scheduled services linking 16 domestic destinations, including Hong Kong and Macau, from its Wuhan base. International services are planned to start this year.
Employees = 897.
(IATA) Code: 8C - 883. (ICAO) Code: DXH (Callsign - EAST STAR).
Parent organization/shareholders: Hubai Dongsheng Real Estate Company (40%); Wuhan East Star Airlines Investment Company (40%); Wuhan East Star International Travel Service Company (20%).
Main Base: Wuhan Tianhe International airport (WUH).
November 2008: Despite the Chinese government's attempt to ease the burden on airlines by reducing landing fees -20% in March, 29 Chinese carriers had failed to pay about CNY4 billion/$585.1 million combined to airports as of September 30, according to the China Civil Airports Association (CCAA). The (CCAA) noted that domestic airlines owed CNY532 million on February 29, with Hainan Airlines (HNA) in arrears -CNY102.2 million. China's big three of Air China (BEJ), China Southern Airlines (GUN), and China Eastern Airlines (CEA) owed CNY45.7 million, CNY64.9 million and CNY44.2 million, respectively. Smaller privately held carriers like East Star Airlines (ESR), Okay Airways (OKA), and Juneyao Airlines (JYA) are debtors as well. The (CCAA) Secretary General, Wang Jian said the defaults mainly comprise fees covering landing, parking and security services. Chengdu-based Eagle Airlines (UEG) reportedly has grounded two airplanes, owing to its shortage of liquid capital and severe debt burden. The (CCAA) said Eagle (UEG)'s defaults had reached CNY39.5 million as of February 29.
In order to defend airports' interests, the (CCAA) vowed to "take collective action" against defaulting carriers, but it backed off the stance later and said it had "constructive" talks with the China Air Transport Association, which represents domestic airlines. The organizations agreed to maintain communication in search of a solution.
January 2009: Air China (BEJ) parent China National Aviation Holding Company (CNAC) intends to take over struggling Wuhan-based, East Star Airlines (ESR) in an effort to expand its foothold in central China.
(BEJ) said in a statement that (CNAC) "has had an initial discussion with (ESR) about purchasing its shares," without revealing how much (CNAC) was planning to buy. There has been no formal agreement.
Industry analysts noted that (BEJ) would enhance its position in the region through an acquisition of (ESR), as (BEJ) does not operate a base at Wuhan, the capital of Hubei Province. China Southern Airlines (GUN) and China Eastern Airlines (CEA) do operate bases there, with (GUN) grabbing 40% of the Wuhan market and (CEA) plus (ESR) holding more than >20% and >10%, respectively. (BEJ) accounts for only 5%.
(BEJ) Chairman, Kong Dong had said that the carrier would "change its previous practice of just focusing on large domestic cities in 2009 and will give some attention to secondary cities," owing to the tough external operating environment. (ESR) currently leases nine A320s and A319s and operates to 16 domestic destinations from Wuhan. (ESR) is struggling to survive as it has been unable to pay off significant debt owed to certain airports.
February 2009: Shanghai-based, Spring Airlines (CQH) and Juneyao Airlines (JYA) stood out among China's struggling privately held airlines and reported a profitable 2008.
Spring (CQH) posted a +CNY21 million/+$3.1 million net profit last year, down -70% from the more than >+CNY70 million earned in 2007. It credited the result partly to a CNY20 million civil aviation infrastructure payment imposed in the second half of last year. (CQH)'s operating revenue climbed +32% year-over-year to CNY1.62 billion as it transported 2.9 million passengers, up +26%, with an average load factor of 93.3% LF.
Juneyao Airlines (JYA) posted a +CNY11.5 million net profit in 2008. It carried 1.4 million passengers.
In contrast to (CQH) and (JYA), other privately run carriers are suffering from capital shortages and struggling to survive in the difficult operating environment. Unlike state-owned airlines, they are unable to secure financial aid from the government. Wuhan-based, East Star Airlines (ESR) and Chengdu-based, United Eagle Airlines (UEG) are unable to pay significant bills owed to certain airports, while Tianjin-based, Okay Airways (OKA) suffered a -CNY200 million net loss in 2008.
Industry analysts assert that most private airlines will have no other option but to merge with the bigger domestic carriers. United Eagle (UEG) is seeking strategic investors for a CNY100 million capital injection while East Star (ESR) has had initial discussions with Air China (BEJ) parent, China National Aviation Holding Company about a stake sale.
March 2009: Air China (BEJ) is pessimistic about its financial prospects and now is not expecting a turnaround this year. It already has said it expects to report a heavy loss for 2008, and Chairman, Kong Dong said, "We don't have confidence that the carrier will earn a profit this year," "Reuters" reported. Kong also said that despite the market downturn, now is not the time to consider a merger among China's "big three." But (BEJ) is continuing to acquire smaller carriers and is on the verge of closing on its purchase of East Star Airlines (ESR).
(ESR) was forced to suspend operations by the (CAAC) (CAC) owing to its heavy debt burden and the collapse of a stake sale deal with (BEJ) parent, (CNAC). It is the second privately held Chinese carrier to suspend service in recent months. Okay Airways (OKA) stopped flying in December, but resumed operations the following month.
(ESR) has been in financial crisis since last year. In June, the (CAC) suspended its right to fly to Shanghai, Guangzhou and Shenzhen because it was unable to remit "air transport funds" to the regulator in time. At year end, airports in Shenzhen, Yunnan and Hangzhou threatened to stop providing services to the carrier unless it paid the service fees it owed. According to the Wuhan Municipal Transport Committee, (ESR) also failed to make lease payments on its 10 A320s to (GECAS) (GEF), forcing the lessor to seek a legal settlement. (ESR)'s current debt is roughly estimated at CNY17 billion/$2.48 billion.
(ESR) was close to selling a stake to (BEJ) parent (CNAC) in an effort to boost liquidity. (BEJ) Chairman, Kong Dong noted recently that (CNAC) was "on the verge of closing on its purchase of (ESR)," but in a statement it released, (ESR) said it would not sell to (CNAC) owing to "its different management concept from (CNAC) and its much smaller size compared to the (CNAC)." A (CNAC) spokesperson said the company sent a letter to (ESR) trying to find out why the offer was rejected without warning or notification but there has been no reply. The spokesperson said (CNAC) remains committed to establishing a presence in the Wuhan market. It signed a cooperative agreement with the Hubai provincial government this month.
(BEJ) parent (CNAC) intends to move forward with its acquisition of a stake in (ESR), despite the Wuhan-based carrier's "strong opposition" to its "forceful purchase." (ESR) was forced to suspend operations on March 15 by the (CAAC) (CAC) owing to its heavy debt burden and the collapse of a stake sale deal with (CNAC). Chairman, Lan Shili was reported to have been kept under surveillance by local police following (ESR)'s suspension. (ESR) sent an e-mail to (CNAC) outlining its objections to the sale.
A (CNAC) spokesperson said, "For now, the working group [CNAC] sent to Wuhan for the stake purchase deal with (ESR), is staying in Wuhan, as the company hopes to continue pushing forward the deal with (ESR)." But the spokesperson also admitted that the "attitude and concrete measures taken by the Wuhan local government" will be a critical factor in (CNAC)'s effort to take control of (ESR). It currently is negotiating the wet-lease of (ESR)'s airplanes.
"Of course the Wuhan government hopes (CNAC) can successfully seal the stake purchase deal with (ESR) so that Wuhan's position as an aviation hub in central China can be strengthened," a Wuhan government transport committee spokesperson said, while stressing that local authorities will not force (ESR) to accept (CNAC)'s offer to merge with (BEJ). The government said that allowing (ESR) to go bankrupt is an option.
Launched in June 2005, (ESR) has registered capital of CNY80 million. Its 10 A320s operate on more than >20 domestic routes from its Guangzhou, Zhengzhou and Wuhan bases.
(ESR) will go bankrupt because of its inability to pay off its debts, according to the Wuhan municipal government. (ESR)'s six debtors reportedly have asked the local court to liquidate the carrier, which suffered a -CNY500 million/-$73.1 million operating loss last year. It is in arrears with both (GECAS) (GEF) and Wuhan Tianhe International Airport and also is behind on its fuel and insurance payments.
(ESR) was forced to suspend operations by the (CAAC) because of the debts and its decision not to sell a stake to (BEJ) parent, (CNAC).
A Wuhan government spokesperson said authorities are considering allowing (BEJ) to operate (ESR)'s airplanes (with (ESR) staff), which would uphold the cooperation agreement signed with (BEJ) three weeks ago. "(CNAC) is committed to exploring the market in the middle part of China," a (CNAC) spokesperson said. It still hopes to acquire a stake in (ESR) but will consider alternatives to increasing its foothold in the region. The spokesperson did not confirm reports that (CNAC) intends to establish a Wuhan branch company.
May 2009: Air China (BEJ) is expected to establish a branch company in Wuhan, capital of Hubei Province, following the collapse of parent (CNAC)'s deal with East Star Airlines (ESR). (ESR) suspended operations in March and went bankrupt after its decision not to partner with CNAC, and now (BEJ) plans to purchase assets including (ESR)'s routes and slots. It intends to rehire (ESR) staff. "We have applied to the (CAAC) (CAC) to establish our branch company in Wuhan owing to the failure of our stake purchase deal with (ESR)," a (BEJ) spokesperson confirmed.
June 2009: East Star Airlines (ESR) may avoid bankruptcy thanks to a takeover offer from Shanghai YuField Industrial Company (SYIC), which submitted its application along with airline stakeholder East Star Tourist Agency (ESTA) to the Wuhan court. Shanghai YuField is expected to lead a consortium that will purchase an 85% stake in (ESR), while original stakeholders East Star Group, ESTA and East Star Holding Company will hold the remainder. The (CAAC) (CAC) forced (ESR) to suspend operations in February owing to its inability to pay off debt. (ESR) had rejected a takeover bid from Air China (BEJ)'s parent company just recently. Its debts reportedly exceed CNY500 million/$73 million.
"After (ESR) announced it would go through bankruptcy procedures [in March], we have been looking for strategic investors to save it from bankruptcy. Now we have found Shanghai YuField and reached an agreement," (ESTA) Vice General Manager, Wu Zhiyong said.
(SYIC) apparently is not the only suitor. There are at least three other strategic investors ready to make CNY5 million investments. Approval of the takeover application is not a formality and the court is obliged to hear the views of (ESR)'s debtors, which include (GECAS) (GEF), China National Aviation Fuel Group, and some domestic airports.
Industry analysts pointed out that (ESR) still faces "many difficulties" even if (SYIC)'s application is approved owing to its fleet issues and fierce competition in Wuhan. It had nine A320s before suspending operations, but those airplanes either have been detained by debtor airports or repossessed by (GECAS) (GEF).
Later, Air China (BEJ) launched its Hubei branch company, officially abandoning its pursuit of (ESR) and opening service from Wuhan to Guangzhou, Hangzhou and Shenzhen. (BEJ) is basing six airplanes at Wuhan and plans to introduce another half-dozen by year end, by which time it will have launched service to Xi'an, Urumqi, Nanjing, Shenyang, Macau (July), and Taipei (August). "We will develop our network in the middle part of China on our own. So whether (ESR) goes bankrupt or introduces new investors doesn't bother us at all. We won't have anything to do with it anymore," a spokesperson from (BEJ) parent (CNAC) said. The Hubei branch has hired about 600 former (ESR) employees, including 47 pilots (FC).
Meanwhile, (ESR) suffered a blow as the Wuhan court rejected the takeover offer from the Shanghai YuField Industrial Company. (ESR) investor, East Star Tourist Agency said it would appeal to the Hubei provincial court.
(ESR)'s liquidation team comprising Wuhan government organs had rejected the takeover offer, citing the large debt owed by (ESR). According to the Wuhan Zhonghuan Accounting Firm, (ESR) has debt of CNY1.01 billion/$147 million with a negative net asset value of CNY579.9 million.
July 2009: East Star Airlines (ESR) asked the (CAAC) (CAC) for permission to resume operations despite a Wuhan court's rejection of takeover offers from China National Aviation Fuel Holding Company and Shanghai YuField. (ESR) was forced to suspend operations and enter bankruptcy owing to its heavy debt burden and the March collapse of a share sale deal with Air China (BEJ) parent, (CNAC).
(ESR) spokesperson, Zhao Changbing disputed reports that (ESR) owed CNY1.01 billion/$147.6 million. "In fact, our debt was about CNY752 million before we were suspended but we have total capital of CNY1.01 billion, so we still have a net asset of CNY257 million, which proves we don't have a financial problem at all. So we hope the regulator [will] approve us to resume operation," he said. He reiterated (ESR)'s interest in welcoming any investors interested in a takeover even though five (CNAF) subsidiaries, seven airports and Shanghai YuField have made no progress.
East Star Airlines (ESR)'s effort to re-launch operations with new investment is facing a significant obstacle as the team charged with its restructuring, composed largely of Wuhan government officials, is insisting that bankruptcy is the only option. "Generally speaking, it is impossible for (ESR) to accept a takeover offer as it lacks the basic conditions to do so," said Zhang Jie, an attorney who represents the team. Zhang told media the airline's "insolvent" financial situation, the termination of its airplane leases by (GECAS) (GEF), a "shortage" of both pilots (FC) and cash and a "deteriorating" safety level are among the reasons that officials have rejected takeover offers.
Two of those offers have come from China National Aviation Fuel Company and a coalition of airports to which (ESR) owes money, although Zhang said that (CAAC) (CAC) regulations prohibit both (CNAFC) and domestic airports from investing in airlines. Wuhan Zhonghuan accounting firm has said that (ESR) has debt of CNY1.01 billion/$147.6 million and a negative net asset value of CNY579.9 million, numbers disputed by the airline. The troubled carrier currently is going through bankruptcy procedures.
August 2009: China Equity Group (CEG) plans to re-launch East Star Airlines (ESR), which is going through bankruptcy reorganization, with a CNY200 million/$29.2 million - CNY300 million investment, according to (CEG) Chairman, Wang Chaoyong. Wang revealed that the group plans to raise the money to restart the troubled carrier in conjunction with seven other companies, including Shanghai YuField. He said (CEG) has "submitted the reorganization application" to the appropriate court. "Hopefully we can get the result in the next two or three weeks," he commented.
The team charged with (ESR)'s restructuring, composed largely of Wuhan government officials, insisted last month that bankruptcy was the carrier's only option. If CEG's plan is approved, the reorganized airline's stakeholders are expected to include parent company East Star Group, which currently has a 40% holding, as well as (CEG) and some of the carrier's debtors. Based on the reorganization plan, (ESR) will operate three airplanes initially with a focus on regional tourism in the middle part of China, allowing it to avoid competition with the country's major airlines.
"We hope the reorganized carrier can make a turnaround and earn a profit in three to five years," Wang said.
Later, it was stated East Star Airlines (ESR) may become the first Chinese carrier to go bankrupt following the Wuhan local court's rejection of China Equity Group (CEG)'s re-launch plan. (CEG) Chairman, Wang Chaoyong said the lack of an agreement on how to handle (ESR)'s sizeable debt was the reason for the rejection. The troubled airline owes money to China National Aviation Fuel Company and several airports. "The team charged with (ESR)'s restructuring [composed mainly of government officials] want much more capital than we can invest. If we have to pay too high a price to re-launch the carrier, I don't think it's a good investment opportunity," Wang said. Officials reportedly insisted on CNY920 million/$134.5 million in new capital, but (CEG) said it planned to invest only CNY200 to CNY300 million.