Jetmagic crash lands investors with €11m bump

Estimated debts of €3.5 million grounded Cork-based airline Jetmagic, The Irish Times learned yesterday. The airline ceased operations on Wednesday night, leaving 400 passengers without return flights.

Its failure has cost its investors, including former Aer Lingus chief, Mr Michael Foley, a total of €11 million.

It is understood that the company owes its creditors €3.5 million, a sum that it would not have been able to repay if it had kept trading. This forced its board to end operations on Wednesday night.

A spokesman for the Cork-based carrier said yesterday that anyone who booked advance flights with a credit card will be refunded through their credit card companies. Those with travel insurance will also be covered against losses.

However, anyone who paid by cash and had no travel insurance will have to make a claim against the company. They will be counted as ordinary creditors when it is placed in liquidation some time in the next fortnight. They are unlikely to be refunded. The airline was not able to say last night how many advance bookings it had taken.

Jetmagic owes airports authority, Aer Rianta, an estimated €150,000. The state company yesterday impounded the only one of the carrier's craft parked at Cork airport to secure its debt. The Air Transport and Navigation Act, 1998 entitles it to do this.

Another creditor is likely to be Austrian financial institution, Erste Bank. Company documents show that it has a mortgage over one of its planes and a company office on Father Matthew Quay in Cork's city centre.

Jetmagic was launched last Easter with an initial €5 million in funding. Along with Mr Foley, who held a small stake, its backers included the Punch family, who have a local manufacturing and distribution business, and members of the O'Flynn family, who have a large construction firm in Cork.

The Irish Agricultural Wholesale Society held at a stake in the airline through a company called Remedios Ltd. The society is a shareholder in IAWS Group plc, but that company had no involvement in Jetmagic.

The company had three Embraer 37-seat and 49-seat aircraft and operated 13 routes at one point. It did not have an airline operators' certificate (AOC) when it began flying, and had to pay another carrier, Crossair, to operate its routes. At the same time, it was paying the lease on its own craft. It subsequently got its AOC. Late last year it dropped flights to Rome and Milan from its schedule, and subsequently sought a further €6 million in funding from its shareholders. Yesterday the company conceded that it had overstretched its resources.

Reacting to the news, the Cork branch of the Irish Hotel Federation, warned that its closure could hit tourism in the region. Tour operator, Stein Travel, called on the Government to introduce a bonding system for that would protect consumers in the event of a future failure.