Cityjet has become a wholly Irish-owned airline following a deal in which the Irish shareholders bought out Swedish shareholder, Malmo Aviation. In addition to the ownership restructuring, the Irish airline yesterday announced it had acquired two aircraft and some spare engines for $18.5 million (about £12.8 million).
The Swedish regional airline sold its 43 per cent stake to the Irish shareholders because it did not "share the same strategy for the future direction of the company", according to Cityjet chief executive, Mr Pat Byrne.
He declined to disclose what the Irish shareholders paid for the Malmo stake. Malmo invested £1.75 million for its stake just under a year ago when it took part in the rescue of Cityjet from examinership. "Malmo has not lost out on the deal. But I cannot say if they have made money. We signed confidentiality agreements. Their shares were acquired on favourable terms for them. It was a win-win situation all around. It suited everyone. We will maintain commercial links with Malmo," he said.
Following the buy-out, Yeoman International has increased its stake to 30 per cent from 17 per cent, becoming the largest shareholder in Cityjet. Yeoman chairman and chief executive, Mr Paul Coulson is non-executive chairman of Cityjet.
Standard Life has raised its stake from 16 per cent to 20 per cent and the four other private investors, including Mr Brendan McDonald, increased their shares in the airline.
The changes in the shareholding structure reflect the funds provided by the Irish shareholders for the aircraft purchase as well as the buyout of Malmo.
Asked why Malmo had sold out less than 12 months after it had taken a stake in Cityjet, Mr Byrne said the Irish and the Swedish shareholders were not in agreement about the future development of the company.
"When Malmo bought in, one of the things on the agenda was the merging of the two airlines to form one regional airline. But the group of Irish shareholders believed it was in the best interests of Cityjet to develop its own brand name and routes and to develop alliances with major carriers such as our alliance with Air France. That was the dominant reason for the change."
Cityjet yesterday announced that it had bought two of the aircraft it has had on lease from US Airways as well as a number of engines for $18.5 million. The purchases, which will strengthen the Cityjet balance sheet and improve its cash flow, have been partly funded through a $10 million loan from Anglo Irish Bank. The $8.5 million balance was contributed by the shareholders. The aircraft purchases would improve Cityjet monthly cash flow because monthly loan repayments would cost less than the lease payments, Mr Byrne explained. "Unusually for a small carrier, we have moved towards having a better balance between ownership and leasing," he said.
Cityjet uses five BAe 146 regional jets. It now owns two of these jets and leases the remaining three. It was currently considering an option to buy a third jet as well as reviewing its requirements for next year, Mr Byrne said.
The jets just acquired are 11 years old. "They are young in their cycle (numbers of flights). They have done 17,500 to 18,000 cycles compared to a full life of 65,000 cycles."
The company operates four scheduled routes including its original Dublin to London City Airport and the recently launched London City to Strasbourg route, which it operates for Air France. Its code sharing arrangements with Air France include the Dublin-Paris route.
In October, Cityjet announced a 50 per cent increase in passenger numbers on its Dublin/London City Airport route for the six months to end September. Revenue was up 52 per cent, it said at that time.
"We want to ensure we have the right sized fleet and the right balance between contract and code sharing work with Air France and own brand business," Mr Byrne said.
Cityjet is interested in taking on more contract work for Air France on the French airline's summer schedule and is considering developing another route out of Ireland.
The company, which would show a loss for the calendar year, moved into profit for the month of November for the first time, he said. "It is a slow climb up. But we have reduced the rate of loss dramatically and we should make a reasonable profit next year."
Malmo and Cityjet are retaining commercial links. Malmo has bought a BAe 146 jet from US Airways, which it is leasing to Cityjet "on mutually beneficial commercial terms". Malmo Aviation took part in the rescue of Cityjet last January. The airline was put into examinership in December 1996 with accumulated losses of £13 million and debts of £8.4 million.
Under the scheme approved for its survival, creditors agreed to write-off £6 million of debts. London City Airport, which was owed £2.4 million, agreed to write-off £1.8 million.
New shareholders, including Malmo, came on board as part of the rescue operation. These included Yeoman International which took a 17 per cent stake. Part of the deal at that time was that Malmo would provide £650,000 of leasing and maintenance services to Cityjet.
