Row could collapse Cityjet rescue plans, court hears
High Court Reporter
A row over demands by contractors involving a potential investor in the refinancing of debt-ridden airline Cityjet, over proposed upfront payment terms for future maintenance work, could collapse rescue plans for the company which is currently in examinership, the High Court was told on Monday.
Now the joint examiners to the carrier, Kieran Wallace and Andrew O’Leary, of specialist firm Interpath Advisory, are to ask the High Court on Wednesday for declarations that the attempted modification of maintenance contracts is invalid.
Barrister Stephen Byrne, counsel for the examiners, told Ms Justice Eileen Roberts that the effect of the proposed contractual amendments would have a material impact on Cityjet’s ability to continue in examinership.
Mr Wallace, in written evidence grounding the application, told Judge Roberts that the new demands could cause the examinership to fail. The court granted the joint examiners short service to bring a notice of motion regarding the new issues before the court on Wednesday.
Cityjet’s sole shareholder, Strategic Alliance of Regional Airlines (SARA), which itself is 80 per cent owned by Air Investment Valencia (AIV), has significant service contracts with sister entities and subsidiaries of SARA.
The court heard that a key condition for the joint examiners to any reinvestment by the shareholder entities was a renegotiation of the company’s various maintenance contracts in order to facilitate the survival of the company, as outlined by the joint examiners and an independent expert.
Mr Wallace stated that since his and Mr O’Leary’s appointment, they have had regular engagement with certain shareholder entities in respect of potential reinvestment in the company as outlined in an earlier report to the High Court.
He said it had become clear that the SARA shareholder entities would not make sufficiently significant concessions on contracts such as would be required to ensure a reasonable prospect of the survival of Cityjet as a going concern.
Demands had been made by the contractors for payments to be made up front on a monthly basis with almost immediate effect.
Mr Wallace said he and Mr O’Leary had decided to pursue alternative investment proposals from other interested parties, and another investment proposal had already been agreed and entered into by the company.
Mr Byrne said that in correspondence with SARA legal representatives, the joint examiners had stated their view it was impermissible for any contracts to be varied. The matter comes up again before Mr Justice Quinn who initially appointed the joint examiners.
