China's first private airline, Okay Airways has suspended passenger services 10 days ahead of schedule, as it could not refuel its aircraft due to an ongoing internal management dispute.

From Friday, many airports had insisted on instant cash payments for fuel from the airline after it was asked by the Civil Aviation Administration of China (CAAC) to stop passenger flights from Dec 15, over flight safety concerns. Normally airlines get fueled first and then pay the fees on a monthly basis.

"We did not expect the problems to worsen so fast. Our pilots are deeply concerned about this, and this could compromise flight safety," Liu Jieyin, president of Okay Airways, told China Daily.

An Okay Airways' airplane was grounded for two hours on Friday in Zhuhai, South China's Guangdong Province as the local airport refused to refuel it before being paid and same was the case later in Sanya, Hainan Province, Liu said.

The Tianjin-based airline is now busy transferring its passengers to other airlines. It had been carrying 2,000 to 3,000 passengers every day. With 11 aircraft, it flies nearly 20 routes. The airline's cargo business, however, continues to operate normally.

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

There has been lots of disagreement between Juneyao and other shareholders as well as the management team since the Zhejiang-based company became Okay Airways' largest shareholder in 2006, Liu said, adding that Juneyao only invested half of the required capital into the airline.

"While all State-owned airlines are now losing money due to falling traffic demand, private airlines are even more vulnerable," said Li Lei, an analyst with CITIC China Securities.

United Eagle Airlines, a private airline based in Sichuan, grounded two jets at the end of last month due to mounting losses. It has not been paying airport fees since February 2007. The Sichuan Airport Group has stopped providing first-class and VIP lounge services to the airline.

(China Daily December 9, 2008)