Last Friday, a High Court judge in Ireland appointed an interim examiner to allow Dublin-based CityJet breathing room to escape its creditors during the COVID-19 crisis. The Irish wet-lease specialist operates regularly scheduled routes on behalf of Aer Lingus and SAS.
CityJet had to ground its fleet of 32 aircraft that, according to aviation website Planespotters.net, includes Bombardier CRJ-900s and four aging British Aerospace BAe 146/Avro RJs.
The necessity to ground the fleet came about after the coronavirus outbreak caused counties around the world to tighten their borders and impose quarantine restrictions on travelers.
Accounting firm Deloitte has been advising CityJet
The decision to seek protection from its creditors comes just weeks after airline founder and current CEO Pat Byrne said that he thought that seeking shelter from the courts would not be necessary.
International accounting organization Deloitte has been advising CityJet on how to manage its financial affairs as the coronavirus cripples airlines.
While speaking with the Irish Independent newspaper earlier this month, CityJet boss Byrne said that his accountants were not preparing a business review before asking the High Court for protection.
When speaking about Deloitte’s role, the 45-year-old executive said:
“They’re just making sure that we have all of the information that we need, giving us a lot of advice and guiding us on negotiations.”
“We’ve been looking at all options,” Mr Byrne added. “We’ve been working with stakeholders, our customers and our shareholder.”
CityJet is viable in the long term
When talking about the current situation on Friday, Byrne said that the examinership is there to help a company prove that they are viable in the long-term.
“I firmly believe that it is both prudent and responsible for the board of directors to have applied for examinership in order to preserve the business in the light of the compounding effect of the global shutdown of airline operations due to the impact of COVID-19.
“We firmly believe that the airline can sustain itself through this standstill period and will emerge as a stronger company at the end of this process and importantly will be well-positioned to grow its operations and sustain our capacity to continue to employ significant numbers of people.
“We have built a great business and a great team at CityJet, and I am totally confident that we will see our way through this stage with the support of our key stakeholders.”
Before the grounding of its fleet, CityJet had spoken to its creditors about the possibility of merging with Spanish regional carrier Air Nostrum.
While listening to CityJet’s case, the court said that there were some positives, including the support CityJet had received from one of its main customers SAS.
While summing up the hearing, Justice Simons agreed that an examiner should be appointed to work with CityJet and its creditors and that it would be beneficial for all parties.
Questions remain about CityJet’s future
While CityJet appears to have bought itself some time, there are still a lot of unanswered questions and doubts that the airline’s creditors will have.
Firstly, no one knows how long this current crisis will last, and when it does finally end, what kind of rules will be in place regarding social distancing. Secondly, getting people to fly again may prove a challenge in the short-term.
In CityJet’s favor is the fact they have two customers who want to use the wet-lease service once things get back to normal. The Air Nostrum idea seems a little far-fetched as the Valencia-based airline flies under the banner of Iberia and would not benefit from a merger with CityJet.
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