Far Eastern Air Transport Corp (FAT, 遠東航空) yesterday said that it would appeal a US district court’s ruling over a dispute with Los Angeles-based Air Lease Corp.
The US District Court for the Central District of California has ordered FAT to pay US$23.37 million to Air Lease for breaching the terms of an aircraft leasing contract.
The payment would cover the costs of finding other leasees to rent the aircraft, aircraft remodeling fees as well as differences in leasing fees between FAT and new leasees.
Total compensation might reach US$30 million, as FAT was also ordered to pay 10 percent interest on the original compensation.
The airline said that its legal department has studied the ruling and identified major issues with the court’s deliberation and the laws that it cited.
The airline said it is operating normally, despite losing the lawsuit, and that the Civil Aeronautics Administration (CAA) is monitoring its financial soundness.
The airline’s operations came under scrutiny after it last month abruptly canceled 31 flights without notifying passengers and travel agencies.
FAT had signed the contract with ALC in 2015 to lease two Boeing 737-800 aircraft.
The first aircraft was new and was scheduled to be delivered to the airline in the US in June 2016.
The second aircraft was four years old and was previously used by Air Berlin PLC, and was to be delivered to FAT in Hungary at the end of June 2016.
On June 18, 2016, the airline sent a team to the US to receive the first aircraft and completed its test flights there.
The CAA had also sent officials to the US to issue an airworthiness certificate for the aircraft.
However, the airline at the last minute canceled its plan to bring the aircraft back from the US, and called off the entire deal with Air Lease.
The airline in July 2016 said that it had reviewed the maintenance record of the second aircraft and found that it was placed in a storage facility for six months for unknown reasons, which Air Lease failed to disclose when it signed the contract.
As Air Lease did not offer an explanation for the situation, the airline decided to fulfill the terms of the contract for the first aircraft and terminate the second contract.
However, when FAT personnel traveled to the US to take delivery of the first aircraft, Air Lease asked the airline to sign an agreement to terminate the contract for the second aircraft and waive all legal rights before it would agree to deliver the first aircraft, which the airline found unacceptable.
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