A group of creditor banks led by Bank of Taiwan (台銀) yesterday urged financially troubled Far Eastern Air Transport (FAT, 遠東航空) to disclose its actual losses and come up with a sound financial restructuring plan shortly after the airline filed for reorganization at the Taipei District Court.
The banks will decide whether they will throw their support behind the airline company and bail it out depending on the plan's feasibility, an executive at Mega Commercial Bank (
If the court approves FAT's application in 180 days, a committee will be formed to help the airline return to health. Until a decision is reached, FAT will remain intact, keeping creditors from immediately foreclosing on its assets or collateral.
"However, should the court reject FAT's application, creditors will take action to protect their own interests by liquidating [FAT's] collateral," another executive at Bank of Taiwan said on condition of anonymity.
Sherry Lin (林秀玲), a senior attorney and partner at Lee & Li Attorneys at Law (理律律師事務所), said that the attitude of debtor banks would play a crucial role in the court's decision on FAT's application.
"They need the consent of two-thirds of the creditor banks to persuade the court that its financial restructuring plan has the support of creditors," Lin said.
Claiming it is still a viable company, the airline said that mounting pressure from debtors forced it to seek court protection one day after it guaranteed that NT$230 million (US$7.25 million) in non-operating income by the end of the month would help pay off its short-term debt.
"It was only a short-term liquidity gap, but as creditors lost confidence and demanded their money back all at once, the overwhelming short-term financial difficulty left us with no choice but to file for bankruptcy," FAT spokesperson Hanson Chang (
"It is a necessary step to keep the short-term credit crunch from hurting the company's long-term operation," he said.
FAT's financial statement as of Sept. 30 showed it had liabilities of NT$9.99 billion, including NT$4.7 billion in bank loans. The company earlier said losses totaled NT$3.4 billion as of Sept. 30.
Minister of Transportation and Communications Tsai Duei (蔡堆) yesterday vowed to protect consumers' interests and ensure neither aviation safety nor flight service quality would be compromised by FAT's problems.
He said that the Civil Aeronautics Administration (CAA) has formed a special taskforce to monitor FAT's operations.
He also urged the airline to quickly settle its accounts with the International Air Transportation Association Clearing House.
"To FAT, this crisis could be a chance for a rebirth," he said.
Tsai refused to comment on media speculation that the government may ask China Airlines (
The FAT Workers' Union last night urged the China Aviation Development Foundation (航發會) to help FAT in the same way it did when Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) suffered a shortage of construction funds.
Tsai, who doubles as the foundation's chairman, said it did not have enough funds to help FAT, adding that the foundation invested in THSRC by purchasing its shares.
The union threatened to stage a walkout at Songshan Airport today to call for government financial support.
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