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A High Court judge has said he is minded to approve a survival scheme allowing regional airline CityJet to successfully exit examinership.
The approved scheme will allow the Dublin-based airline to continue as a going concern, on what was described on “a slimmed down” basis, with more than 140 jobs at the company being retained.
The scheme, which was supported by a majority of the airline’s creditors and shareholders, also sees tens of millions of euro of its debt being written off.
CityJet's founder and executive chairman Pat Byrne welcomed Mr Justice Quinn's declaration.
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“This is a great relief as it means we will have a viable, surviving core business which, although much smaller than before, nonetheless provides us with the opportunity to continue as a regional airline and places us in a position to grow again in the future,” he said.
The Irish Airline Pilots’ Association (Ialpa) also welcomed the news, saying it would protect CityJet’s remaining pilot jobs.
However, the pilots' union said that it was disappointed to see Irish pilots' jobs moved to Denmark, where CityJet flies services for Scandinavian airline SAS, while many of its members lost their jobs in Dublin.
“This disappointment was compounded by CityJet advertising pilot vacancies for Denmark two days after pilots were made redundant in Dublin,” Ialpa said.
In April the airline sought the protection of the courts claiming it was insolvent due to financial difficulties that were exacerbated after its aircraft were grounded due to the Covid-19 outbreak.
The impact of the pandemic also interrupted a planned merger with another airline and a proposed private restructuring of the company, it claimed.
The airline said it had debts of €500 million, and at the time of entering the examinership process had a net deficit of liabilities over assets on a going concern basis of €186 million.
Its creditors include the Triangle Group, several firms involved in the leasing of aircraft, Investec, the Revenue Commissioners, as well as debts owed to related companies.
Creditors
At the High Court on Wednesday evening Mr Justice Quinn said he was satisfied to approve a scheme of arrangement put together by the airline's examiner Mr Kieran Wallace of KPMG.
The judge said that creditors would do better under the examiner’s proposals than if the airline was liquidated. He said the required number of creditors and shareholders supported the examiners’ proposals.
The judge said he was minded to formally approve the scheme after certain steps, including the finalising of arrangements made with certain creditors and the implementation of changes to the airline’s constitution, take place.
He adjourned the matter to a date in mid-August.
CityJet provides craft and crew to fly services for other airlines rather than operating its own schedules.
It lost several clients during the Covid-19 lockdown, including Aer Lingus, but still has a contract for these services with SAS.
Seeking the scheme’s approval James Doherty SC for the examiner said his client had stress-tested the company and was satisfied that it would return to profitability thanks to a €3.9 million investment from a related company CityJet Holdings Ltd, funded by a third party Triangle Holdings LP.
Eight out of the 14 classes of creditors supported the survival scheme, five opposed it and one class of creditor abstained. Two out of the three classes of shareholders opposed the scheme, counsel added.
Counsel said that under the scheme the majority of the creditors will get what he said were small dividends ranging between 15 per cent and 1.25 per cent.
However, those amounts were better outcomes for creditors than if the airline went into liquidation.
The only alternative to the scheme was to wind up the company which would see most creditors receive nothing, counsel added.
It was a matter of regret that so many of the airline’s employees had lost their jobs, counsel said.
Job losses
Prior to the Covid-19 outbreak more than 410 people were employed by the airline in Dublin. Under the scheme that number has been reduced to 160.
In addition, more than 600 others were employed at European based subsidiaries. That number has been reduced to just over 200.
Counsel said the airline had the support of its customer SAS and expected six to eight of its aircraft to be back flying by mid-August.
Counsel said he hopes the airline will expand its business, particularly in the Nordic Scandinavia region, when market conditions improve.
At Wednesday's hearing pilot Stephen Duffy had voiced his objection to the scheme, which he said was not just and equitable to him.
He said he was one of more than 90 persons suing CityJet and its former owners Air France over alleged tax and pension benefit losses they suffered, before the French courts.
Those persons have made claims totalling €10 million against the airlines.
Representing himself, Mr Duffy said that under the proposed scheme he would get just 1.25 per cent of the €520,000 he claims he is owed, which he said was unfair to himself and others involved in the litigation.
Mr Justice Quinn said he had every sympathy for the position of Mr Duffy but did not accept his arguments that the scheme was unfair to creditors or that the airline had used the Covid-19 pandemic as an excuse to enter the insolvency process.
The airline, he said, had fully disclosed all matters to the court when it sought the appointment of the examiner.