Chinese airline suspends flights on financial woes

BEIJING -- Authorities ordered a private Chinese airline to suspend its operations Sunday because of debts owed to General Electric Co.'s aviation subsidiary, amid a travel slump caused by global economic turmoil.

East Star Airlines, based in the central Chinese city of Wuhan, was told to halt flights as of Sunday, the city government said in a statement.

No one at the airline was available for comment Sunday, according to an operator who answered calls to the company's general inquiry line. A woman who answered the phone at the airline's ticket sales office confirmed that flights have stopped, but said she did not have details. No mention of the order was made on its Web site.

The economic slowdown has hurt all of China's airlines, but the country's handful of private carriers are particularly affected since they cannot count on the huge government bailouts that several state-run carriers are now seeking.

Sunday's statement said a regional branch of the General Administration of Civil Aviation of China issued the order after a request from the Wuhan city government.

The city government said on its Web site the airline had failed to pay plane rental fees to Fairfield, Conn.-based GE Commercial Aviation Services, General Electric's aircraft leasing company.

The aircraft firm sought help from the local government and was applying to begin legal proceedings against the airline, the government said.

East Star operates 18 domestic routes and arrangements were being made to place East Air ticket holders on flights with other carriers, the aviation administration said in a statement.

China's first private airline, Okay Airways, began a planned one-month suspension of passenger service in December after skittish airports insisted on cash to refuel its planes. The carrier was suffering from financial and management woes.

In January, state media reported that China gave struggling airlines a US$360 million tax break and US$26 billion in loans to its main aircraft maker to try to shore up the industry.