Air France and Air Foyle provide financial support to `secure' CityJet future
Irish airline CityJet will get an £8 million (#10.17 million) cash injection under which Air Foyle, a British-based aviation group, takes a majority shareholding in the company.
The deal also involves Air France taking a 25 per cent stake, in return for extending a £2 million loan to CityJet.
CityJet's chief executive, Mr Pat Byrne, said last night that the investment would secure the airline's future and enable it to expand its services. The Air France equity involvement was a massive vote of confidence, he added.
Loss-making CityJet has a £40 million annual turnover. But since April, it has entered into several new contracts with Air France, which will boost turnover to £65 million over the next year. It should make a small profit then, says Mr Byrne.
Air Foyle is privately owned, based in Luton and has previously done work for Easyjet, the low-cost airline based in Britain. It operates a fleet of BAe146 freighter aircraft on behalf of worldwide courier company TNT. It is also an air cargo operator transporting outsize loads.
Air Foyle's annual turnover is around £50 million sterling (#75.8 million) and is "very profitable", according to a company spokesman.
Air Foyle Charter Airlines, a subsidiary, provides what are known as wet-lease and flight operations management services to scheduled and charter operations.
"Wet-lease" is where the operator (or airline) supplies the aircraft, staff and so on, and flies the route on behalf of someone else, but is guaranteed an income regardless of passenger numbers. Mr Byrne said Air Foyle would provide capital and access to expertise, but would not be involved in the operation of aircraft. Air Foyle had a low public profile, but was highly regarded within the aviation industry, he added.
The deal will change the firm's shareholding structure significantly. Air Foyle will take a 50.1 per cent stake in CityJet, in return for a £4 million investment.
Air France is investing £2 million, to be converted to 25 per cent equity whenever it wishes.
A group of private investors will put up another £2 million. Current investors include Yeoman International (30 per cent), Standard Life (20 per cent) and four private investors. These are horse trainer Mr John Mulhern, Mr Eugene Murtagh, executive chairman of Kingspan, Mr Brendan McDonnell, managing director of electrical goods distributor Dimpco, and Mr Mike Murphy, managing director of Murphy Insurances.
All shareholders' stakes will be diluted and not all investors are investing more capital, according to Mr Byrne. Those who do not will be replaced by new private investors. It is understood that Standard Life and Yeoman International, who have been providing financing for leasing aircraft, will remain involved.
Two members of Air France will join the CityJet board, as will Mr Christopher Foyle, founder of Air Foyle, who becomes chairman. Mr Byrne remains as chief executive.
CityJet employs 350 people and is based in Dublin. It has a fleet of six BAe-146 and two Saab-2000 aircraft. It operates 56 flights a week between Dublin and Paris on an Air France franchise basis. It also has a wet-lease contract for flights between Paris and London City Airport and Florence, and flies to Toulouse and Madrid. CityJet operates its own flights from Dublin to London City, East Midlands, Faro in Portugal and Malaga in Spain.
The investment follows the collapse of a deal earlier this year when an Australian company tried to buy 60 per cent of CityJet. National Jet Systems had offered £3.5 million for the stake and had proposed a radical overhaul of the company.
This would have included 100 redundancies, selling or ceasing operations in the London route and dropping the East Midlands route. The board rejected the offer.
The Australian company would also have had a problem with EU regulations, which prohibit non-EU nationals from holding a majority stake in an EU airline. But CityJet's chairman, Mr Paul Coulson, had written to the Australians suggesting a way to sidestep this.
Mr Coulson was asked to remain on the CityJet board, but declined because of work commitments, particularly his involvement in Ardagh, the glass bottle manufacturer which this year concluded a major takeover deal.
CityJet has had a turbulent history and two years ago was put into examinership with losses of £13 million and debts of £8.4 million. Creditors agreed to write off £6 million and the company was refinanced with a £4 million cash injection.