Janes Aviation Ltd

[andyjanes]

New Era

OFFICIAL – Friday afternoon 25th April 2008 Janes Aviation Limited was issued with an Air Operators Certificate. Monday 28th April 2008 Janes Aviation Limited was issued with a Type ‘A’ Operating Licence. – The Budgie lives – long live the Budgie!!!

I would like to thank all the Emerald employees who enabled the recovery of that business back to profit in the first quarter of 2006.

Most will know the sequence of events but for the record here is my recollection.

In brief if we go back to August 2002 when I made the decision to buy the Streamline Group both to diversify the customer base from the highly concentrated exposure to Royal Mail to add another core customer in Federal Express and to build up a fleet of Shorts 360 aircraft to add to the two already in operation – that would complement the success of the HS748.

Over 80% of the business was then from these two customers.

I did not have the right crystal ball as in the first quarter of 2003 we were informed by Fedex that they wanted to upgrade from the Shorts 360 to the ATR42 but were not prepared to offer a contract to match the funding requirements for the ATR42.

Also in the same quarter Royal Mail announced the findings of their comprehensive Transport Review covering road, rail and air and had made the decision that from October 2003 they wanted all air services to be provided by “all weather, all jet, all container aircraft”. As Emerald was a major accredited Royal Mail supplier we were urged to participate in the tendering process. Initially based on the award of an eight year contract significant effort went into researching suitable airframes of 737-300 and 146-200 types for availability/conversion/finance with a broad understanding that this would be the future direction of the business.

Well into the proceedings having established genuine interest with financiers, conversion shops and a source of aircraft it became clear when the Post Office released the draft contract that it failed to meet the basic requirements to sustain funding. The only outcome was then going to be a combination solution for Channel Express and Titan who were already operators of the types.

I decided against the ‘circle the wagons’ option of downsizing the business and took a more optimistic view in the knowledge that the DHL Convair 580s were on ‘short finals’ and that the ATP was already establishing itself as the replacement for an eight tonne lift.

Considerable dialogue and negotiation took place with BAE and at that time little if any concern was identified by the experts in the Class E and transverse net restraint requirements to finish the large door conversion. This transverse net restraint system was modeled on the existing well established HS748 mod which Emerald had already introduced some years ago.

The option then was to either acquire ATPs from BAE or go independent. Detailed research was undertaken by Engineering, myself and other senior managers with quotes from third parties for the work into a complete project costing of buying and putting the three Biman ATPs and two USF ATPs into service. This preparation of the funding proposal was overseen by BDO Stoy Hayward. Based on this the independent route was projected to be significantly cheaper by approx $1mn per airframe and with better engine and major rotable lives.

Funding was obtained from Barclays based on the detailed funding proposal.

No need in this release to go into great detail save to say that the new Mods became a huge technical stumbling block not just in terms of cost but more importantly an extended timeline – not just for Emerald but also for BAE and their customers such as Magic Bird.

The extra funding required put the business into a different customer category with Barclays and our account management was transferred to Barclays Business Support at Leeds. This was despite the independent valuations of Air Claims which confirmed worst case that although we would not be saving the full $5mn as against having sourced aircraft from BAE we would still have saved money and ended up with better spec aircraft – with contracts lined up for the aircraft. BDO Stoy Hayward was brought back in at the request of Barclays and they validated the extra required funding and strongly recommended to Barclays to provide the necessary funding as required to ensure the extended timeline which was the critical point was kept to the very minimum.

Barclays dragged their feet and failed to bring in their own internal specialists on project finance and aviation. Emerald was then left under the ‘control’ of Barclays Business Support at Leeds who did not have any of the specialist skill sets necessary – preferring to take the simplistic approach that they should insist we engage turn round specialists that they had used previously (Colin Smith and his associate, Noel Lake) and a team from KPMG – none of whom had any prior knowledge or dealings with an aircraft operator.

In Jan 2005 I was summonsed to a meeting with Barclays to be told that on advice from KPMG they were going to immediately withdraw support from Emerald and put the company into Administration. I strongly urged them to reconsider as I had full confidence in a successful outcome with the dedication of the staff, further shareholder support and existing customers who were waiting on ATP availability. To back that I agreed to inject a further £500k to add to the £1mn the company had already on loan from my family. Barclays agreed but substantial cash then went out every month to KPMG and the other Barclays nominated advisors to the extent that even prior to administration some £700k had been spent at the behest of Barclays for no added value for any other stakeholder.

With an extremely difficult year in 2005 but by the first quarter of 2006 Emerald was back in profit and was servicing all Barclays loans and interest in full – fully justifying the underlying strength of the business. KPMG/Barclays caused severe disruption to the normal day to day workings of the business with senior managers including myself not able to do anything without their prior consent – they were in effect controlling the business.

In May 2006 without any specific warning a fax was received from the CAA advising the company that the AOC was being provisionally suspended that night due to concerns over crew training standards – copy letter available if anyone wants to see it. I immediately contacted Barclays Bank and they agreed that I should work with the CAA to scope out a recovery plan and undertake a financial damage assessment. The very next day Barclays took an entirely different course of action on the advice of KPMG and they brought in a potential investor, who claimed aviation expertise, to act as consultants on the promise that they would get the AOC re-instated in short order with new Form 4 post-holders – hardly a demonstration of any understanding of regulatory protocols. Inevitably Barclays came back to me after the damage had been done to ask me to invite KPMG in as administrators – I refused but they proceeded anyway by obtaining a Court Order.

The CAA took their course of action without any prior warning to me as the ‘controlling mind’ of the business. I would like to think that they genuinely believed a recovery plan without KPMG, Barclays and their advisors would have been realistically achievable. If anyone would like to supply me with any specific information concerning the demise of Emerald then I would be delighted to hear from you. I will be undertaking a forensic review of events leading up to the provisional suspension of the AOC with a view to taking action specifically against Barclays.

It is regrettable that certain individuals particularly if they are ex Emerald staff who wish to remain anonymous have seen fit to make personal attacks against myself and other senior management of Emerald in this forum – in particular Mick O’Brien. Whatever faults there were in the management of the business we all tried tirelessly to turn the Company around to avoid the fate which Barclays/KPMG had sought to achieve from January 2005 onwards. I hope the above will provide a taste of the background of events.

Information I have to date does identify certain misguided individuals who worked against the interest of the Company, staff, suppliers and customers by making unsubstantiated claims to the CAA without going through any of the company grievance procedures - for what? I cannot assess what effect that had on the thinking of the CAA but it could not have provided any constructive benefit. Maybe these are the same people who are blaming the management of Emerald.

JANES AVIATION LIMITED has been established to operate some of the ex Emerald 748s and I would welcome hearing from any ex Emerald staff who want to register any interest in employment. It is not going to be easy but no-one goes into aviation for an easy life!!

I believe the Emerald thread should now end and I welcome feedback to this notice and a positive vision for the future of HS748 operations.

Contact details:-

Janes Aviation Limited
48 High Road
Benfleet
Essex SS7 5LH

e-mail [email protected] or [email protected] or to me at [email protected]