Mon, May 26, 2008 - Page 2 News List

Aeronautics agency to decide whether to penalize airline

By Shelley Shan  /  STAFF REPORTER

The Civil Aeronautics Administration (CAA) is expected to decide today whether to penalize Far Eastern Air Transport (FAT) for failing to improve its operational shortcomings within a grace period.

The shortcomings include its failure to cover monthly takeoff and landing fees for its airplanes, employees’ wages and other operational costs on time. Earlier this month, the company also unilaterally announced that it would temporarily suspend its operations without giving prior notice to the government and passengers.

The government had set a deadline of today for the company to improve its financial situation.

CAA Director-General Billy Chang (張國政) warned last week that the company could face penalties, including the suspension of its rights to operate part or all of its flight routes if it failed to meet the conditions by today.

The administration also has the authority to revoke the airline’s operational license, he said.

Last Friday, the administration gave China Airlines (CAL) the right to temporarily operate FAT’s Palau route.

CAL will launch charter flight services to Palau on Saturday. The temporary period of service is set to terminate on Aug. 27.

The administration has not yet canceled FAT’s rights to operate any of its routes.

Meanwhile, major shareholders of FAT — including CAL, Far Eastern Group, China Development Industrial Bank and Kuo Hua Life Insurance — were expected to inform the administration today whether they would increase their stakes in the company.

The key stakeholders unanimously declined to reveal whether they were willing to increase their investments when meeting with administration officials last week.

Last Monday, the company secured the court’s approval to extend crisis measures, which could result in protection from creditors for another three months.

Three of FAT’s directors resigned from the board last week after talks between the management and workers broke down.

FAT’s employees have not received paychecks from the company for almost two months, nor will they be eligible to receive reimbursement or unemployment subsidies from Taipei City’s Department of Labor until the company applies to cease its operations.

FAT’s financial crisis is the first thorny issue on new Minister of Transportation and Communications Mao Chi-kuo’s (毛治國) plate.

“Shareholders must take the initiative to solve the financial problems before the ministry can assist them,” he said in a conference call with reporters on Wednesday. “Issues will arise if public resources are used to bail it out.”

FAT’s financial problems first came to light when it filed for bankruptcy protection with the Taipei District Court on Feb. 17. On May 12 it announced that the company would suspend all its operations the following day.

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