Star1’s mounting debt problems are trouble for travelers.
KLAIPEDA - If you can, try to avoid flying Lithuanian airlines. In 2009, bankruptcy of the Lithuanian carrier, flyLAL-Airline, was declared after the company failed to secure credit from banks to continue operations, and no strategic investor expressed interest in a takeover. Eligijus Masiulis, the minister of Transport and Communications, was quick to respond to the collapse of the carrier at the possibly worst time – just before the start of events of the national venue “Vilnius – European Capital of Culture 2009.”
“We’re having intensive consultations with a number of airlines, including Star1. We hope that the number of direct flights will be restored to previous levels by the summer and all this discomfort for air passengers will be over very soon,” the minister said, sounding optimistic. However, Lithuania’s newest airline, Star1, lasted just a bit over one year, drowning in financial troubles. Just a few months ago, in July, Star1 Airline’s general director Martynas Laivys sounded upbeat, speaking of the company’s future. “As we see good potential in the cheap flights market, in order to offer new destinations starting this winter, we are increasing our authorized capital from 2.2 million litas (637,600 euros) to 9 million litas,” Laivys announced in the middle of July. Joint stock venture Star Team Group is the sole shareholder of the airline. It also runs travel agency Star Holidays. It was estimated that Star Team Group investments in its airline might reach up to 40 million litas in three years.
However, last Friday, Star1 Airlines announced they had cancelled all flights up to Oct. 1 due to unexecuted financial commitments to various parties, including Vilnius International Airport.
Due to its debts, the carrier’s single plane, the Star1 Boeing, was held at Dublin Airport, leaving nearly 100 passengers stranded. Left without food or drinks, passengers scrambled to desperately call the carrier’s office, but no one was available. Kestutis Auryla, director of the Civic Aviation Administration (CAA), acknowledged to have been inundated with frantic calls for help from Dublin. However, the agency’s head, in a position to ensure the airline’s smooth operation, was terse in his comment, maintaining, “The company’s plane has been held due to its debts to the leasing company. That is how much I know for now.”
CAA initiated an investigation into whether Star1 Airlines concealed certain information about its activity and financial status. Upon determining that the company has transgressed the carrier certification requirements, its certificate, enabling operating, may be suspended, or, at worst, the license can be revoked. According to Auryla, the investigation may last up to several weeks. Auryla’s warnings followed his previously matter-of-fact, but soft tone, trying to persuade stranded passengers to stay “calm, as everything is being done to solve the problem.” However, the company’s misfortunes went on unfolding last week, as Vilnius International Airport laid claim to Star1 Airlines in court, urging them to award the airport 1.4 millon litas in debt and penalties. In addition, another company, responsible for recovery of wages, went to court, demanding to start a bankruptcy case for the airline, as one employee has not been paid 35,000 litas of salary from June.
According to other leaking sources, there may be more creditors to file complaints in court. Though the airline’s leadership expressed optimism in starting negotiations with investors over managing debts, this seemingly did not work out, as other Star 1 flights, to London, Girona and Milan have been cancelled as well. Due to the late cancellation, in Gerona Airport, nearly 120 passengers were stranded. Most of them hoped that the flight cancellation in Dublin was an extraordinary event that would not repeat itself in Gerona. Furthermore, Gerona-Vilnius flight passengers were pleasantly surprised by the company representative’s warm message wishing a pleasant journey. “We even boarded the plane, but the pilot excused us, announcing that the flight would not take place. He did not explain the reasons for the grounding. I suspect we were told to board the plane deliberately, as we were forced to disembark in a luggage section, where the carrier is not supposed to provide its stranded passengers accommodation and food,” Stoskute, a passenger, said, sharing her nasty experience with the daily Lietuvos Rytas. The passengers, including families with small children, were left unattended by both the embassy and the airline’s representatives. Only the next morning did the dismayed people scramble to book flights back home with other airlines.
While hundreds of passengers fretted over the cancellations in the airports, in Turkish and Greek resorts stranded Lithuanian vacationers, clients of Star Holidays, Star Team Group’s travel agency, due to the indebted travel organizer, experienced not only financial loss, but humiliation as well.
“With the news on the plagued Star1 plane spreading, the administration of the Turkish hotel we were staying at realized that its subsidiary company, Star Holidays, had not yet paid for the stay of the numerous Lithuanian guests. Therefore, we were told to check out immediately. Facing this possibility, we ourselves paid for our two-day stay. Other Lithuanian tourists who refused to pay for their stay were kicked out and spent the night in the hotel’s lobby. We were supposed to return only on Tuesday, but because of the unforeseen circumstances, we had to cut our vacation short. We have lost two days of our vacation, but some people have lost two-week vacations. It is an absolutely deplorable situation,” a young woman, vacationer in a Turkish resort, lamented upon her arrival at Vilnius Airport on Sunday evening. The vacationers were brought back home on a chartered plane. “I have endured the loss of at least 300 euros. My vacation is completely ruined,” another vacationer mourned.
The State Tourism department was quick to react to the disrupted vacations due to Star Holidays’ fault, and revoked the agency’s travel organizer certificate. Thus, the company cannot assume new financial commitments, but it has to fulfill its already effectual obligations.
On Sept. 27, Eligijus Masiulis, minister of Transport and Communications, said that the airline has possibly violated EU aviation rulings, and the revoking of the air carrier’s license, according to Masiulis, is “likely.”
“Star1 was supposed to ensure the passengers’ security and to bring them somehow back to Lithuania. Unfortunately, it has not been done,” Masiulis said. The only Star1 plane is still being held at Dublin Airport.
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