Posted on: 26 August 2010 by Ross McSweeny
The Irish High Court has appointed Michael McAteer of Grant Thornton as Interim Examiner to Aer Arann, following a petition to enter examinership made by the company following a resolution of its board of directors.
A full hearing of the company’s application will be heard on 8 September and in the meantime Aer Arann is in interim examinership and under the protection of the Court. Examinership is a provision in Irish company law that is designed to help companies that have financial difficulties but that also have a reasonable prospect of survival and the High Court, the Independent Accountants and Aer Arann consider that the company has a viable business plan. The airline will operate as normal in order to preserve as many of the 320 jobs in the company as possible and the hundreds of associated jobs in airports and aviation support services companies.
No flights have been cancelled or are planned to be cancelled, the carrier intending that there will be no impact on customer travel or bookings as a result of the move into examinership.
Following the High Court hearing on 8 September, Aer Arann expects to remain in examinership for an initial period of up to 70 days. During that time the company will benefit from the protection of the Court from its creditors so that it can re-organise and re-structure the business.
Aer Arann and the Examiner will also use the time to negotiate with potential investors and a number of parties have expressed their interest in the airline.
The decision to petition for examinership follows two years of loss-making trading in a difficult economic environment with recession negatively impacting the global aviation industry followed by the volcanic ash disruptions this year.
Following a cost reduction programme and the signing of the franchise agreement with Aer Lingus which has proven to be profitable Aer Arann was on budget for 2010. However the direct impact of the volcanic ash disruptions earlier this year and the subsequent drop in forward bookings and yield revenue led to the requirement to re-structure and seek new investment through examinership.
Details on Aer Arann’s performance will be reserved for the hearing in the High Court but in broad terms the airline lost approximately €6million in each of 2008 and 2009. Losses of €6million have been incurred to date this year predominantly due to the impact of the volcanic ash disruption. These combined losses have led to a deficit in shareholder funding of approximately €13million at the end of July this year.
The company had been trading well in the first quarter of 2010 but following the losses of the previous two years it did not have the cash reserves to deal with the downturn when the volcanic ash crisis occurred in the second quarter.
The examinership does not involve Aer Arann Islands which is a separate company.