AOC holder Air Kilroe’s slots at London Gatwick have also been surrendered.
Joint administrators of the UK’s Air Kilroe, which holds the air operator’s certificate of regional carrier Eastern Airways, have been unable to sell the company, and have instead started to divest its assets.
Eastern Airways ceased operations in October last year, but its administrator RSM sought to rescue the carrier by selling it as a going concern via a creditors voluntary arrangement.
Although the AOC was suspended the administrators aimed to protect it by meeting conditions including maintenance and retention of key employees.
After the administrators offered the company for sale, and received 10 indicative offers, they selected a preferred bidder and entered an exclusivity arrangement.
An initial payment of just over £286,000 ($376,000), to cover ongoing costs, was received in December.
But the proposed bidder subsequently told the administrators in January this year that it was withdrawing from the exclusivity pact and making no further payments – although both it, and other potential buyers, remained interested in purchasing the carrier.
The administrators state, however, that owing to “tight timescales” and the need for funding to meet “significant” costs, “no deal could be reached for the sale of the company as a going concern”.
“As a result, despite the best endeavours of the joint administrators and [asset valuation agent Gordon Brothers], the joint administrators had to proceed to instruct their agents to sell the assets,” they add.
Since the sale of the company is no longer being pursued, the Air Kilroe AOC remains suspended and the administrators expect it to be revoked.
Air Kilroe held eight summer slots at London Gatwick. But the timing of Eastern Airways’ collapse, combined with the ‘use it or lose it’ rule for slot retention, meant the opportunity to transfer the slots to another airline was “extremely limited”, state the administrators.
Over 40 potential buyers for the slots were contacted but the administrators state that the slot times and market saturation led Gordon Brothers to conclude that there would be “no realisable value”, and the slots have since been surrendered.
Eastern’s nine unencumbered Jetstreams – along with their associated consignment of rotables – have been sold to an unrelated third party, and an asset-purchase agreement signed.
At present, three of the 13 BAe Jetstream 41s recorded by the Civil Aviation Authority as owned by Air Kilroe are listed for export, the regulator’s data discloses.
While details of the transaction are confidential, the administrators say the payment for the assets will be received in two tranches, and the initial payment of £950,000 has been received.
Based on the company’s most recent draft accounts, RSM has assigned a book value of £10.3 million to the nine aircraft, while the rotables and spares are valued at £10.9 million.
The report does not reveal how much is expected to be realised through the sale of the aircraft, but it estimates that the spare parts will generate £1.6 million.
That includes the sale of a batch of parts – for Embraer, ATR, Saab and De Havilland aircraft – to US specialist AeroVision International for $850,000.
Eastern had access to a Jetstream 41 simulator, located at its premises, although the system was owned by an unconnected entity. Bookings for pilot training had continued, but the arrangement for operating the simulator was loss-making and it has not been running since April. The administrators are still discussing options for the system with its owner.
Most of the personnel at Air Kilroe and Eastern Airways were made redundant at the time of the airline’s cessation of operations, although 51 members of staff were initially retained to assist with such matters as preservation of assets and regulatory compliance. This figure has since been reduced to 12 employees and none are expected to be retained once the asset divestments in both companies have been completed.
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