China's East Star Airlines attracts new investors

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The owners of the grounded privately-owned Chinese carrier East Star Airlines plan to sell an 85% stake in the company to outside investors to help it avoid bankruptcy and begin operations once again.

East Star will get 500 million yuan ($73 million) from a group of investors led by Shanghai Yujie Industry, a little-known textile manufacturer, Chinese media reported on Tuesday. No other details were available and company officials declined to comment when contacted.

The Civil Aviation Administration of China grounded the Wuhan-based airline in March by after the city government said that the carrier was unable to meet payments to creditors. These include the parent of fuel supplier China Aviation Oil and leesor GE Commercial Aviation Services (GECAS). The move came two days after East Star rebuffed a take-over bid by state-owned Air China.

The carrier subsequently filed for bankruptcy protection with a court in Wuhan and has debts of over 500 million yuan, according to the newspapers. The court must approve the deal and the investors will submit their plans to the creditors shortly, they added.

According to Flight's ACAS database the airline has a fleet of nine Airbus A320-family aircraft, all on lease from GECAS. It launched operations in May 2006 and its owner is the Wuhan-based travel agency conglomerate China East Star Group.