Financial and management problems are forcing OK Air to suspend passenger flights from Dec. 15 to Jan. 15, announced the company's chairman of the board, Wang Junjin on Wednesday.
The civil aviation authority, has already approved Wang's application for suspension. He said OK Air's cargo business, which partners with Fedex, will not be affected.
The privately owned carrier operates 20-plus domestic passenger routes in Tianjin, Changsha, Hefei, Kunming, Harbin, Hangzhou, Haikou and Sanya.
Wang promised that the company would not lay off workers during the suspension.
The company's passenger flight business employs about 800 people, according to the company's spokeswoman, Han Jing.
She said the passenger sector accounted for 80 percent of the company's business.
"The business suspension may break the company's capital flow, and force the company into bankruptcy liquidation," she said.
Shanghai-based Junyao Group through the Beijing Transport Energy Share-holding Co. owns 63 percent of the airline.
Wang, who is also chairman of Junyao, said the board decided to replace Liu Jieyin as president of OK Air. He will be transferred to another post.
Wang did not say when this decision was made or where Liu will be moved to. His replacement has not yet been made.
However, Liu told Xinhua that the suspension decision was unilaterally made by the company's largest share holder of Junyao without consulting other share holders.
"The chairman said the management problem raised the flight safety concerns in his flight suspension application. However, the current problem is the lack of capital support from Junyao, which hampered the airline's business growth," said Liu.
The chairman said "the company will use the suspension period for internal adjustments, which will hopefully help make a fresh start for the beginning of next year."
He said the company plans to resume flights before the upcoming Spring Festival in January as that is a popular time for travel in the country.
OK Air became China's first private carrier in 2005. It has a fleet of five Boeing 737 passenger jets, three Boeing 737 cargo planes, one China-made Xinzhou 60 and two Yun-8 cargo planes.
The private carrier sent a market signal for an expansion in February last year, when it signed a framework purchase agreement with China No. 1 Aviation Industrial Group for 30 Xinzhou 60 aircraft. The company declined to say how the current problem would affect the order.
OK Air had projected the 2008 passenger handling volume at 1.2 million at the beginning of this year. However, its volume in the first nine month only reached 710,000.
Besides OK Air, China's fledgling private airlines include Juneyao, East Star, Air Spring and EU Air. The companies engaged in talks this year to cope with the market slowdown, but there was no agreements reached.
(Xinhua News Agency December 4, 2008)