CityJet is reportedly well-pleased with the deal announced this week whereby it does considerably more work for Air France and gets a new £8 million (€10.16 million) cash injection. The company has racked up losses of around £17 million since its establishment in 1994.
Part of the problem has been that it was under-capitalised, but an important element of the deal is the extra work which strengthening the ties with Air France brings in. Turnover is set to rise from £40 million-£64 million this year as a result.
CityJet will be flying more routes out of London, Paris and other French cities on behalf of Air France. The French airline has an agreement with its unions that it can contract out routes which third parties can operate more cheaply.
CityJet chief executive Pat Byrne's reasoning for chasing Air France was that he looked around Europe and realised the major hubs - such as Heathrow, Schipol and Frankfurt were already full and could not develop further. However, the French government had the foresight to allow for the building of two extra runways to add to the two existing ones at Charles de Gaulle airport in Paris. The first of these will be completed later this year.
In essence, much of CityJet's work for Air France is to feed traffic into Charles de Gaulle airport, the Air France hub. Some industry observers say working in such a manner for a major airline is fine until the recession hits - then the first to go is the contract work. Not so, says Pat Byrne, airlines always have to feed traffic to their hubs - regardless of whether there is a recession.
CityJet's link with Air Foyle is also interesting. Although unknown in consumer circles it is known in the aviation industry and is said to be well-regarded. It has a number of operations, including management facilities operations, and has worked for EasyJet, Colourair of Norway and Air Scandia. It is not a scheduled airline in its own right, but flies for other operators. One source said this week that this mix of new partners for CityJet was probably the right one, a large partner taking a larger stake would inevitably swallow up CityJet.
The cash injection will also see current shareholders' stakes diluted. It is understood that Standard Life, which held 20 per cent and was one of those which trumped up a total of £4 million (€5 million) following examinership in 1996, will not be putting up money this time around. It is also understood that some of the individual shareholders will not be putting up more cash. These include Mr Eugene Murtagh, Kingspan's executive chairman.
