China's first private airline Okay Airways will halt passenger services from Dec 15 due to an internal dispute between its controlling shareholder and the management team.

The Civil Aviation Administration of China (CAAC), the industry regulator, has allowed the airline to stop flying due to "flight safety concerns" in light of the internal dispute. Its cargo business will, however, remain unchanged.

The Tianjin-based airline's largest shareholder, Juneyao Group, filed an application with the CAAC last month seeking suspension of passenger services, on grounds that the management of the airline is "chaotic" and could threaten flight safety.

Wang Junjin, chairman of Juneyao, was quoted by China Business News yesterday as saying that Okay Founder and President Liu Jieyin has been removed from his post.

Liu told China Daily yesterday that Juneyao's position as the controlling shareholder should be challenged because it had only invested half of the required capital into Okay.

"Appointment or removal of a president must be approved by the board. His decision is not yet effective," Liu said, adding that he did not know when the airline would resume operations.

Zhejiang-based Juneyao acquired a 71.43 percent stake from Okay's largest shareholder, Beijing Okay Traffic and Energy Investment Co Ltd, in 2006 when the airline sought investments to finance further growth. The move indirectly allowed Juneyao to become the controlling shareholder in Okay.

Juneyao was established in early 1990s as a dairy producer. It was also China's first charter flight operator. It launched a commercial airline, Juneyao Airlines, in Shanghai in 2006.

Okay Airways operates five B737 jets, three B737 freighters, one MA60 turbofan airplane and two Y-8 general-purpose aircraft. It flies nearly 20 routes from Tianjin.

It also provides domestic air transportation for FedEx Express.

(China Daily December 5, 2008)