Boss of failed Aberdeen Airport airline accused of moving cash
06.02.08
The boss of failed Aberdeen Airport based airline City Star ordered staff to empty its bank accounts days before it collapsed, according to the Press and Journal newspaper.
The newspaper reports that Runar Arnason, managing director of City Star Airlines, instructed staff to transfer £68,000 - with £30,000 going to a sister firm at Aberdeen Airport, Caledonian Airborne Engineering, and the remainder to its parent in Iceland, City Star Holding.
The instruction was given on Friday January 25. City Star Airlines ceased operations on Wednesday January 30 shortly after the airport seized one of its planes over unpaid fees. The Press and Journal says that it has seen a copy of Mr Arnason's e-mailed instructions, which staff said left no money to pay the monthly salaries. They said that a similar situation had nearly arisen in December.
The former staff members told the newspaper that the airline was 'continually being drained of cash by its Icelandic parent'. One is reported to have said: 'We had been charged around £30,000 a month rent by City Star Holding for each of our four aircraft. But then from January last year it was increased to £100,000 a plane, though this higher figure was to include maintenance and insurance.'
'We were making money before, but the airline could not afford these inflated charges. A huge amount of cash was flowing to Iceland. It was obvious the Icelandic parent had financial problems.'
A second employee told the newspaper that City Star Airlines had, as a consequence of cash continually being drained from the firm, run up major debts, with Aberdeen Airport due more than £100,000. Staff were furious to learn last Thursday their January salaries would be late and fear they will not be paid.
Mr Arnason could not be contacted for comment by the newspaper. His brother Atli, a director of City Star Airlines and chief executive of City Star Holding, said the parent company has enough money to re launch City Star Airlines and the salaries would be paid early in February.
Asked about reports of large sums being transferred to Iceland, he insisted everything had been above board and that the airline had ceased operations to protect the group's assets.
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