Scheme to save CityJet lodged in High Court by group's examiner

A SCHEME of arrangement has been lodged in the High Court by the examiner to CityJet, Mr John McStay.

Mr McStay has formed the opinion that the company is capable of survival. A meeting of creditors to approve the scheme of arrangement is scheduled for January 6th.

CityJet, which has accumulated trading losses of £13 million, is to increase the frequency of its Dublin London flights from five to eight per day.

It has taken delivery of a fifth aircraft on loan from Malmo Aviation of Sweden, the main investor in a group which is prepared to invest £4 million if the scheme of arrangement is approved.

Malmo, Mr Paul Coulson's Yeoman International Holdings, Standard Life and a number of private investors, stand ready to [put money into the company.

Malmo is to invest 40 per cent of the £4 million, with Yeoman and Standard Life investing 15 per cent each. Standard Life is an existing institutional investor in the Irish airline.

A further £1 million is to be borrowed from the banks.

Malmo is to take a 40 per cent stake in Cityjet.

The airline employs 165 people and has its headquarters at Dublin airport. The company's chief executive, Mr Patrick Byrne, told the High Court earlier this month that most the company's trade creditors had accepted a 75 per cent write off of their debt.

The airline operates mainly between Dublin and London City Airport, but also flies to Brussels, Zurich and Paris. Mr Byrne told the court that one of the factors which had caused difficulty had been the disappointing number of business class passengers originating from Britain. That situation had now improved, he said.

The fifth aircraft which the company has received will allow it increase the frequency of its Dublin London flights, thereby increasing the attractiveness of the airline.

On January 6th the number of return flights per day will be increased from five to six. On February 2nd the frequency will be increased to seven, and it is planned to further increase the frequency to eight per day.

Mr Bryne told the court that in its first year of operation Cityjet made losses of £6.6 million. In its second year the company lost £3.7 million, and in the third, for the eight months up to November 30th last, it lost £2.2 million.

He said the total assets were £3.5 million and the total liabilities were £12 million. The net liabilities were £8.4 million. The company was insolvent.

US Air Leasing Inc, from whom the company leases its aircraft, was supporting the company, the court was told. Creditors to the value of £3.2 million, being 50 per cent of the trade creditors to CityJet, were prepared to support the company by agreeing to writeoff 75 per cent of their debt.

Mr Byrne told the court he believed the business was sound and well capable of survival as a going concern. He later said the examinership was designed merely to give the firm breathing space to implement a financial restructuring.