Examiner in at loss-making Aer Arann as debts mount
Troubled firm must secure fresh investment
Published 27/08/2010 | 05:00
AER Arann last night admitted it could no longer pay its debts, but insisted it had a "reasonable chance" of successfully emerging from a court-led restructuring process.
The declarations came as the High Court agreed to appoint a temporary examiner to Aer Arann, which also operates the Aer Lingus regional franchise.
The protection extends to September 8, when Aer Arann must return to court with an update on efforts to secure fresh investment and strike deals with creditors.
Last night's statements to the court revealed for the first time that Aer Arann lost €6m in 2008 and another €6m in 2009 and has lost "approximately" €6m so far this year.
The losses were blamed on the economic downturn, exacerbated by this year's volcanic ash which strangled forward bookings and triggered massive "duty of care" payouts.
"These combined losses have led to a deficit in shareholder funding of approximately €13m at the end of July," the Padraig O Ceidigh-owned airline said in a statement.
At the court hearing, Aer Arann furnished an independent accountant's report testifying to its viability and stressed that its creditors would be better served by restructuring than winding up the company.
Significant creditors are understood to be supportive of the examinership efforts, including AIB which is owed €3.9m and agreed to provide a fresh €1m overdraft.
Other creditors include the Dublin Airport Authority, Aer Lingus, the Irish Aviation Authority, aircraft leasing companies and regional airports, some of whom count Aer Arann as their only airline.
Aer Arann also stressed that it was actively pursuing fresh investment, with three potential investors having already expressed an interest. A spokesman for Aer Arann last night declined to elaborate on the identity of the potential investors.
Senior sources at Aer Lingus last night rejected suggestions that they would build on their existing franchise arrangement by taking an equity stake in Aer Arann. "We're not going to take a stake," one insisted.
"There's no truth in that whatsoever."
The airline, which was once valued at about €100m, is understood to be seeking investment in the €10m to €15m range, which would heavily dilute the stake of founder Mr O Ceidigh.
Aer Arann employs about 320 people. The airline yesterday said it would "preserve as many of the 320 jobs in the company as possible, and the hundreds of jobs in airports and aviation support services companies".
Sources stressed that Aer Arann's decision to apply for examinership had been "entirely voluntary" and was not due to pressure from any creditors.
Aer Arann's reliance on soon-to-expire state subsidies, known as Public Service Obligation (PSO) routes, has long been commented on as a weakness. However, it is understood that the PSOs now make up less than 30pc of Aer Arann's turnover.
Ryanair last night slammed the subsidies saying it would be calling for an investigation of the PSO subsidies as the Government pays €10m a year to Aer Arann. Sources also dismissed suggestions that Aer Arann's status as an unlimited company meant that founder Mr O Ceidigh would be personally liable in the event of the airline's collapse.
While the Irish-registered Aer Arann is unlimited, it is owned by an Isle of Man company which is ultimately owned by Mr O Ceidigh. "There's no question of unlimited liability coming up," said one source.