Another chairman disappears in China

Head of East Star ‘missing’: reports
Reuters in Beijing
12:14pm, Mar 18, 2009     

Air China (SEHK: 0753, announcements, news) ’s acquisition bid for East Star Airlines, a small struggling carrier, has been thrown into confusion after the East Star chairman went missing, domestic media and the Financial Times reported on Wednesday.

An Air China news department official told the China Securities Journal that the flag carrier’s merger offer had yet to receive a reply from East Star, a private airline that has been grounded because of unpaid debts.

The official securities newspaper said that an anonymous letter from East Star stated that its chairman, Lan Shili, could not be accounted for.

Caijing, a financial magazine, reported on its website that Lan Shili had been placed under house detention after East Star’s operating licence was suspended on Sunday.

The Financial Times also said Lan Shili had “disappeared”.

Air China and East Star officials were not immediately available for comment.

Air China chairman Kong Dong said earlier this week that the flag carrier would press ahead with its planned acquisition of East Star, which is based in the central city of Wuhan and has a fleet of nine aircraft.

Slumping air traffic due to slowing domestic demand has made it difficult for mainland’s small private airlines to compete with state-owned Air China, China Eastern (SEHK: 0670) and China Southern.

Since December, China Eastern and China Southern have announced plans to receive a total of 10 billion yuan (HK$11.35 billion) in cash injections from the government to help them ride out the slump. Private carriers do not enjoy such support.