Creditors of indebted Balkan Airlines rejected a recovery plan for the ailing Bulgarian flag carrier yesterday, opening the way for its liquidation after more than 1½ years in receivership.

The decision will allow the government to proceed with a plan to set up a new national flag carrier, which will be unburdened by debts, transport minister Mr Plamen Petrov said. Balkan was grounded for more than two months early last year due to unpaid debts and, since then, its fate has been clouded by uncertainty. It has been in receivership since March 2001.

The airline's creditors voted in an open-door court session on the recovery plan, proposed by the airline's administrators, under which creditors would receive equity stakes in return for cancelling the airline's debts. More than 50 per cent of its debt, which stood at 180 million levs (€92.5 million) as of March 2001, is owed to the Bulgarian state, which rejected the plan.

The administrators said after the court session that the decision meant the gradual halting of operations by Balkan, which now has a staff of some 1,000 and flies to 20 destinations with a fleet of two Tupolev-154Ms and two Boeing 737-300s.