The High Court has appointed an interim examiner to the Dublin-based regional airline CityJet, giving it protection from its creditors in a bid for survival.
The airline and its subsidiaries, which flies routes on behalf of other airlines including SAS and Aer Lingus, employs 1,175 people, over 410 of whom are based in Dublin.
The airline, which is best known for flying routes out of London City Airport, sought the protection of the courts from its creditors due to financial difficulties which were exacerbated after its fleet was grounded by the Covid-19 outbreak.
The decision to seek examinership comes just two weeks after CityJet founder and CEO Pat Byrne said he thought the company could avoid doing so.
CityJet's auditor, Deloitte, had been providing business advice to the carrier as the pandemic cripples air traffic, but Mr Byrne told the Irish Independent earlier this month that Deloitte was not preparing any business review as a precursor to an examiner being appointed.
"They're just making sure that we have all of the information that we need, giving us a lot of advice and guiding us on negotiations," he said at the time.
"We've been looking at all options," Mr Byrne added. "We've been working with stakeholders, our customers and our shareholder.”
Speaking today, Mr Byrne said that examinership is designed to assist a company that can demonstrate “long-term viability”.
"I firmly believe that it is both prudent and responsible for the board of directors to have applied for examinership in order to preserve the business in the light of the compounding effect of the global shutdown of airline operations due to the impact of Covid-19," he said.
"We firmly believe that the airline can sustain itself through this standstill period and will emerge as a stronger company at the end of this process and importantly will be well-positioned to grow its operations and sustain our capacity to continue to employ significant numbers of people."
He added: “We have built a great business and a great team at CityJet and I am totally confident that we will see our way through this stage with the support of our key stakeholders.”
The impact of the virus, the company's counsel Rossa Fanning SC told the court today, interrupted and adversely affected a planned merger with another airline and a proposed private restructure of the company.
However, despite the uncertainty in the aviation caused by the pandemic, CityJet says that the business can saved following a successful examinership process.
At the High Court on Friday, Mr Justice Garrett Simons said he was satisfied to appoint experienced insolvency practitioner Kieran Wallace of KPMG as interim examiner to CityJet.
The judge said while the company was insolvent and unable to pay its debts as they fall due, he accepted evidence from an independent expert that the airline has a reasonable prospect of survival if certain steps are taken.
Those steps include a successful restructuring of the airline and the examiner putting together a scheme of arrangement with the company's creditors, which if approved by the High Court will allow the firm to continue to trade as a going concern.
Cost cutting measures have also been introduced, which the company says will result in the saving of millions of euro.
Mr Fanning, appearing with Stephen Byrne BL, said the company founded by respected entrepreneur Pat Byrne, who is one of the company's current directors and its executive chairman, had been in business since the early 1990s.
Counsel said the company, which no longer flies scheduled routes itself, and has moved to a model known in the aviation industry known as wet leasing, where it provides serviced aircraft and crews to operate routes for other carriers.
In each of the last three years the firm had revenues of over €220m. The company had made a profit in 2017, but suffered significant losses in 2018 and 2019 due to various factors.
The company has debts of €500m, and current has a net deficit of liabilities over assets on a going concern basis of €186m, counsel said.
Its creditors include the Triangle Group, firms involved in the leasing of aircraft, Investec, the Revenue Commissioners, as well as debts owed to related companies.
CityJet operates a fleet of 34 aircraft, including 28 CRJ900 jets and eight Avro RJ85s.
"We've had to absolutely cut our costs to the bone," said Mr Byrne earlier this month. "With huge sacrifice by staff, we've absolutely managed to minimise our costs in all areas."
In order to counter its difficulties, plans had been put in place with its creditors to restructure the business and merge with Spanish airline Air Nostrum.
The airline’s fleet, which mainly flies routes around the Nordic countries and Scandinavia, have been grounded as a result of the outbreak.
Counsel said that there were positive aspects including that the company's main customer, SAS, has agreed to support it during the current hiatus, and that there had been positive engagements with its creditors.
Counsel said while a return to commercial flying was uncertain the company expected that its services will return gradually over the coming months, and that the company could make a profit if the examinership process is successful.
Counsel said that the appointment of an examiner would be beneficial for all parties concerned.
The Judge said that he was satisfied from the evidence put before the court that an interim examiner should be appointed to the firm.
The examinership the judge said would be a complex one, when all matters including the amount of debt involved were taken into account, and he said not time should be lost in a process that must be completed within 100 days.
After approving Mr Wallace's appointment as interim examiner Mr Justice Simons adjourned the matter to a date later this month.