East Star shows 'protest' to Air China

Last Saturday, an email signed by "Lan Shili", president of East Star, attracted media attention. The email represented a vigorous protest to China National Aviation Holding Company, Air China's parent company, about Air China's attempts to takeover East Star.

Air China is showing its hunger to devour the small East Star Airlines. [Xinhua]

The mail which was sent to a China Business News (CBN) reporter says East Star refused further cooperation with China National Aviation Holding Company (CNAHC), following contacts between the two companies. On March 13, East Star even issued a "solemn statement" about the refusal, and the company's fleet was entirely grounded in the following day. "I reiterate my personal protest over CNAHC's hostile acquisition," says the email.

It is yet to be verified whether the email is indeed from Lan Shili, but an East Star medium-level official said: "East Star has refused to cooperate since the beginning. I can't verify if the email is from our boss, but it represents our views on the issue."

The China Business News has learned from multiple sources that Lan Shili is still in Wuhan, where East Star is based, but his movements are restricted and his whereabouts are monitored.

CNAHC's PR officer Ji Hongquan told CBN that his company still hopes to move the deal forward. Negotiations continue between the two companies concerning a "soft landing" plan, i.e. lending both aircraft and pilots to Air China, in an attempt to ease East Star's problems following the grounding order.

But a spokesperson from the Wuhan Municipal Transportation Committee tells the media that the municipal government has stopped thinking about a re-organization of the two air companies concerned, and recent meetings with the government were more about settling the issue by alternatives to acquisition, such as bankruptcy.

In view of this, Ji Hongquan indicates that CNAHC needs to see the local government's attitude and its concrete plans before deciding whether or not to push forward the merger.

The CBN also learns that East Star was the subject of legal proceedings by GE Commercial Aviation Services (GECAS) on March 10 due to a failure to pay up on its monthly lease contract.

"The government's approach to settling the East Star issue and the outcome for the company will to some extent be the guideline should issues like this occur in the future", says aviation law expert Zhang Qihuai.