LA PAZ, Bolivia (AP) -- Bolivian regulators rejected a bailout plan for troubled AeroSur on Wednesday, giving the grounded airline until July 11 to resume flights or lose its license.
The decision highlights what critics have called politically biased treatment of the airline in favor of 3-year-old state-owned Boliviana de Aviacion.
The upstart state airline now has a virtual domestic monopoly, and says it plans to begin flying soon to Spain and the United States, destinations AeroSur abandoned last year.
AeroSur is saddled with debts of more than $100 million, including back taxes that authorities says it owes. It halted flights last month after failing to secure new financing.
Bolivia's public works minister, Vladimir Sanchez, said last week that the company owes its more than 1,200 workers more than $30 million alone for back wages and medical insurance payments.
Its owners claim political persecution.
Former AeroSur president Humberto Roca, who still owns 7 percent of the airline, moved out of the country to avoid prosecution for alleged subversion. Bolivian prosecutors alleged the airline provided tickets to foreign mercenaries who were slain in 2009 in the eastern city of Santa Cruz, seat of opposition to President Evo Morales.
AeroSur's apparent last hope was William Petty, an American mining investor whose offer to invest $15 million to keep the airline flying was rejected by the government on Wednesday as insufficient.
The 20-year-old airline gained a monopoly and began to expand in 2007 when state-run Lloyd Aero Boliviano went bankrupt.
But then Boliviana de Aviacion was established with $15 million in government seed money and an additional $8 million state infusion later, its general manager Ronald Casso said. Now with nine planes, the airline will need another $13 million to open the new international routes, Casso said.
AeroSur employees, who are owed at least three months in back pay, briefly halted operations at Santa Cruz's Viru Viru airport on Tuesday, blocking the runway for 20 minutes.
A government decision that the company owed taxes dating back to 2006 grounded flights two months ago, leaving hundreds of passengers stranded. AeroSur had sold 15,000 to 16,000 tickets through July of 2013, Sanchez said in a report.
A former president of Bolivia's Central Bank, Armando Mendez, said the government has been overly strict, creating the impression "it wants AeroSur to go bankrupt." He said the country could benefit from two airlines.
Associated Press writer Frank Bajak contributed to this report from Lima, Peru