Far Eastern Air Transport (FAT) yesterday said that it has filed an appeal with the Ministry of Transportation and Communications (MOTC) against penalties it received from the Civic Aeronautics Administration (CAA) for failing to reduce its financial risks.
The airline, which belongs to the FAT Group (樺福遠航集團), first secured a bank loan and later used the loan to fund other affiliates of the group, the CAA said.
Because the loan was used to fund non-aviation businesses, the CAA twice fined FAT for running its businesses under high financial risk, in the first and second quarters, and each time told the company to reduce financial risks, the authority said.
The airline and its chairman, Chang Kang-wei (張綱維), were each fined NT$600,000 (US$19,950) in the first quarter, the CAA said.
The penalty rose to NT$3 million for the company and NT$1 million for Chang in the second quarter, as the company was again found to have failed to address the issue of high financial risk.
CAA Air Transport division Director Han Chen-hua (韓振華) said that, after examining the airline’s financial statements and conferring with accountants, the authority decided to fine the airline in accordance with Civil Aviation Act (民用航空法).
“The company would not have had any problem if the loan had been used to purchase or maintain aircraft, or to fund projects relevant to the development of its businesses. However, it used the loan to fund group affiliates, which was inappropriate,” Han said.
Han said the administration had no access to any of the FAT affiliates’ financial statements, adding that if any of these companies encountered financial difficulties, FAT would be affected.
Far Eastern chief operating officer Tseng Chin-chih(曾金池) confirmed that the company secured a NT$2.2 billion loan from the Taiwan Cooperative Bank.
However, Tseng said the loan was used to pay back money it owed other group affiliates when it tried to restructure its finance.
“We could not have paid our debts, maintained aircraft and paid employees’ salaries during the financial restructuring period without funding from these affiliates. It is time to pay back the money we owe now that we have succeeded in restructuring our finance,” Tseng said.
The CAA insisted on fining the company even after it explained many times that the loan was used to repay debt, Tseng said, adding that the punishment did not make any sense and that he had tried to appeal the fines with the MOTC, which oversees the aviation authority’s operation.
FAT does not exclude the possibility of filing a lawsuit at an administrative court if the MOTC sides with the CAA against the company, he said.
FAT’s operations were suspended in 2008 while the company was facing a financial crisis.
In 2009, the airline was recapitalized by Chang and his Huafu Enterprise Co (now FAT Group), after a financial restructuring plan for FAT was approved by the court.
The company finished restructuring its finances in 2015, making it the first airline that was able to turn around its operation through financial restructuring.
It now operates domestic, international and cross-strait services and recently unveiled its first ATR-72 aircraft, which it leased to replace its old McDonnell-Douglas aircraft.
In addition to FAT, the FAT Group owns companies in construction, asset management, travel, real-estate development and other sectors.
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