AIB saved struggling Aer Arann with €1m credit lifeline
Published 29/08/2010 | 05:00
AER Arann would have gone to the wall last week with the almost immediate loss of over 300 jobs had it not been thrown a €1m lifeline by its biggest creditor, the Sunday Independent can reveal.
Allied Irish Banks -- which is owed €3.9m by the troubled regional carrier -- extended the €1m in fresh funding to allow for the appointment, by the High Court, of an interim examiner.
Had this money not been forthcoming, the examinership would not have been allowed to proceed, as sufficient working capital for the airline's day-to-day expenses would not have been available.
With the €1m facility in place, the High Court sanctioned the appointment of Michael McAteer of Grant Thornton last Thursday.
Aer Arann now has the protection of the court from its creditors for a period of up to 70 days.
Among the company's other major creditors are the Dublin Airport Authority (DAA), who are owed €2m in fees relating to Aer Arann's use of facilities at Dublin, Cork and Shannon.
The High Court heard last Thursday evening that an independent accountant's report had shown that Aer Arann has a reasonable prospect of survival.
But should the examiner fail to arrest the situation, more than 300 people directly employed by the troubled carrier stand to lose their jobs.
The airline's chairman, Padraig O Ceidigh also faces the prospect of suffering significant personal financial loss as he has given personal guarantees amounting to €1.2m to the Allied Irish Banks as part of the terms of Aer Arann's overall funding facility from the bank.
A brief inspection of the company's financial position shows that its difficulties are significant.
While Aer Arann has claimed that it was on course to meet its budget targets before being hit by the Icelandic volcanic ash crisis earlier this year, figures released by the airline last week show that it suffered losses of €6m in 2008 and losses of €6m again in 2009 -- long before the crisis occurred.
The airline said it had recorded losses of €6m again this year, bringing the total amount lost since 2008 to €18m.
The extent of those losses are arguably made worse when viewed alongside the level of subsidies Aer Arann is set to receive from the State under the terms of its three-year Public Service Obligation (PSO) contract for providing services to Galway, and combined services to Knock/Derry and Sligo/Donegal.
According to official figures from the Department of Transport, the regional carrier is entitled, under the terms of this agreement, to receive a total of €39,591,566 from the taxpayer should it manage to deliver the requisite numbers of passengers on the routes covered.