Court told about survival scheme and new investors for CityJet

 

A SURVIVAL plan for the Dublin based airline CityJet was being formulated and negotiations with proposed new investors are at an advanced stage, the High Court was told yesterday.

Mr John McStay, accountant, was appointed examiner to Business City Express Ltd which trades as CityJet and has net liabilities of £8.4 million.

In a report to Mr Justice Kelly yesterday, Mr McStay said it was anticipated that a proposed scheme would facilitate the survival of the company.

It was essential that the business of the company be continued during the protection period to preserve any value for creditors.

Mr McStay, in an affidavit read by Mr Michael Collins SC, for the company, said negotiations with the proposed new investors to provide interim loan funding were at a advanced stage.

"It is my opinion that the company should continue to operate under the protection of the court with a view to proposals for a scheme of arrangement being finalised," Mr McStay said.

He stated that the company was insolvent and unable to pay its debts.

The company had obtained conditional agreement from certain major creditors to write off a proportion of their debts. Discussions were in progress with Malmo Aviation, Sweden, and a number of Irish investors, who proposed to inject new share capital of £4 million. Malmo Aviation also proposed to provide technical expertise and cost savings through synergy with its own similar business.

Mr McStay said he had conducted a preliminary review of CityJet's business plan into which Malmo Aviation had significant input. It showed the company was capable of survival as a going concern, given certain conditions.

The business plan envisaged leasing a further aircraft to bring the total fleet to five. It also envisaged increased frequency in flight schedules to increase the proportion of business class passengers, thereby increasing the average yield per passenger.

Agreements with Air France for new Dublin Paris and London Paris routes were expected to provide significant revenue and profits during 1997.

The plan envisaged the company's operating costs would be significantly reduced by lower landing charges which had been agreed with London City Airport, its major hub airport by reduced necessity for unscheduled aircraft maintenance and hiring costs by reduced aircraft leasing costs which had been negotiated with the lessors and by economies of scale resulting from the Malmo Aviation relationship.

Ms Grainne Clohessy, counsel for the Revenue Commissioners, said they did not object to the scheme provided taxes were paid in the usual way.

Mr John O'Donnell, counsel for Mr McStay, said the scheme of arrangement would be delivered no later than December 20th.