A deal involving the purchase by an Australian company of 60 per cent of CityJet has collapsed, The Irish Times has learned. A spokesman for the company said last night the airline board rejected a £3.5 million (€4.4 million) offer from National Jet Systems (NJS) after senior management argued against acceptance.
The move means a reprieve for at least 100 of the airline's 350 staff, who were to be sacked under the deal. The Australian company had proposed that CityJet sell or abandon routes and lease two planes to another airline.
It also emerged last night that the deal, had it gone ahead, would have side-stepped EU regulations which prohibit non-EU nationals from holding a majority stake in an EU airline. The CityJet deal would have seen a privately-owned Australian company control 60 per cent of the airline, but shielded this fact from the authorities.
Under the terms of the proposed agreement, a new holding company was to be formed, which would own 100 per cent of the airline. The holding company would be 60 per cent owned by NJS's chief executive, Mr Warren Seymour and his partner Ms Adele Lloyd, with the remaining 40 per cent held by CityJet shareholders.
But Cityjet's chairman, Mr Paul Coulson, in correspondence seen by The Irish Times, suggested what he termed a "minor modification" to this, pointing out that non-EU nationals cannot own more than 49.9 per cent of an EU airline.
"The obvious fix for this is to have the additional 11 per cent held by an EU national of your nomination," Mr Coulson wrote to Mr Seymour.
Mr Coulson said it was important for the Irish authorities to see that CityJet still controlled the company, before they granted an Air Operator Certificate (AOC) for a new business to be run, and later sold, by the holding company.
"This could be achieved by Yeoman (Mr Coulson's own company) acting as the temporary holder of an additional 11 per cent equity the holding company, to be transferred to an EU national of your nomination following the granting of the AOC," he explained in the letter.
"In the interim Yeoman will give to NJS whatever safeguards it requires in relation to voting powers in regard to this 11 per cent holding, together with an irrevocable undertaking to effect the transfer of the 11 per cent (for nominal consideration of £1) post the issuing of the AOC," Mr Coulson wrote.
But a spokesman for CityJet said last night: "No deal was signed, nor will one be."
As part of the proposed agreement, Mr Seymour was to pay £3.5 million over a seven week period.
Also, Cityjet would, by the end of March 1999, "reduce staff numbers by at least 100", sell or cease operations on its route between Dublin and London City Airport, and drop its route between Dublin and East Midlands.
Company sources said traffic on these routes had jumped in the past two months, so closing them - and reducing staff as a result - was no longer on the agenda.
A spokesman for the Minister for Public Enterprise said last night the Department had been given preliminary information of CityJet's intention to sell 49.9 per cent of its shares to NJS. A meeting between the company and departmental officials had been scheduled, but had not yet taken place, he added.
A spokeswoman for the European Commission said last night the commission took the ownership rules for airlines very seriously, and would be likely to investigate any deal which sought to by-pass the 49.9 per cent regulation.
Established five years ago, CityJet has experienced turbulent times in the competitive Irish marketplace. Two years ago it was put into examinership with losses of £13 million and debts of £8.4 million, and creditors agreed to write off debts worth £6 million.
NJS, owned by Mr Seymour and Ms Lloyd, is based in Adelaide, Australia. It has 44 aircraft and employs around 1,000 people.
