DUBLIN, Ireland: A dispute over demands by contractors, linked to a potential investor in the refinancing of debt-laden airline Cityjet, threatens to derail rescue plans for the carrier, the High Court was told this week.

At issue are proposals requiring upfront monthly payments for future maintenance work—terms that, according to the airline's joint examiners, could jeopardize Cityjet's examinership.

Kieran Wallace and Andrew O'Leary of Interpath Advisory, the joint examiners, will now ask the High Court on August 20 to declare that attempts to modify the maintenance contracts are invalid. Barrister Stephen Byrne, representing the examiners, told Justice Eileen Roberts that such amendments would materially affect the company's ability to remain under examinership.

In written evidence, Wallace warned Judge Roberts that the new demands could cause the process to collapse altogether. The court has granted the joint examiners short service to bring a notice of motion on the matter before the court on August 20.

Cityjet's sole shareholder, Strategic Alliance of Regional Airlines (SARA)—80 percent owned by Air Investment Valencia (AIV)—has extensive service contracts with its own subsidiaries and sister entities. The court heard that one key condition of any reinvestment by these shareholder entities was the renegotiation of the airline's maintenance contracts, which were considered essential to the company's survival by both the examiners and an independent expert.

Wallace said that since his and O'Leary's appointment, they had regularly engaged with SARA entities about possible reinvestment, as earlier reported to the High Court. However, it had become clear, he said, that SARA would not agree to the level of contractual concessions required to ensure Cityjet's reasonable prospect of survival as a going concern.

Contractors, meanwhile, demanded that payments be made up front on a monthly basis, to take effect almost immediately. Wallace told the court that in light of this, he and O'Leary had opted to explore alternative investment offers from other parties. One such proposal, he added, has already been agreed and entered into by the company.

Byrne further noted that in correspondence with SARA's legal representatives, the joint examiners had made clear their view that varying any contracts in this way was impermissible. The case is now set to return before Justice Quinn, who initially appointed the examiners.