Ireland’s largest tour operator Budget Travel is to cease trading this evening with the loss of 172 jobs and the closure of 17 shops.
In a statement issued this afternooon the company said it had applied to the High Court to have the company placed into provisional liquidation and for the appointment of Simon Coyle of Mazars as provisional liquidator.
Senior executives of the company and the liquidator are due to meet with the Commission for Aviation Regulation this evening with a view to making arrangements to cater for holidaymakers who are currently abroad and for customers who had been scheduled to depart in the coming days and weeks.
Some 747 Budget holidaymakers are effectively stranded abroad, the High Court heard this afternoon, but the company is to pay for them to be put up in hotels and will also assist in getting them home. Almost 400 other people who booked holidays with Budget and are due to depart on flights this weekend will have to seek refunds from the aviation regulator.
The company said it has already drawn up contingency plans and will work constructively with the Commission to minimise the disruption caused to holidaymakers.
A helpline has been established at Budget Travel to deal with queries from customers concerned about their bookings. The number for the helpline is 01 6613122.
Budget said it currently has a bond of €11.4 million in cash lodged with the Commission for Aviation Regulation which will be used to assist holidaymakers abroad and refund any deposits or bookings made with the company which can not now be honoured.
Ms Justice Mary Laffoy was told today that Budget had made a profit of some €3.9 million for the year ending October 2008 on the basis of a profit of some €5 per passenger but was "caught off guard" by the speed and severity of the recession and had massively overestimated projected turnover for the year to October 31st last.
Passenger numbers "fell off the cliff" in the twelve months to October 31st last and Budget was left with pre-booked contracts which it could not terminate without incurring onerous penalty clauses, Bernard Dunleavy, for Budget said. This meant it was opertaing at an average loss of €50 per passenger.
Budget also claims the actions of the aviation regulator in allegedly refusing to decide its application to renew its licence on November 1st last or to repay some €4 million alleged excess overpayment of its travel bond had jeopardised its business. The regulator on November 16th refused to renew the licence.
Mr Dunleavy added Budget was "pushed over the edge" by demands for repayment of inter-company loans of some €3.8 million which expired today. Budget could not repay those sums, counsel said.
The company's managing director Eileen O’Sullivan, today expressed her regret at the decision to place the company into provisional liquidation.
“This has been a painful and distressing time for us all and we deeply regret that this situation has arisen. We particularly regret the impact of the decision on our loyal customers and on our colleagues across the company many of whom have worked with us for decades. We will do everything we can to minimise the impact of this decision especially on those who are currently travelling with us," she said.
Ms O'Sullivan said that an ongoing dispute with the Commission over the granting of licences for the coming year had brought financial challenges to a head.
"The travel industry in Ireland is facing massive pressure from a sharp and sudden collapse in demand this year. We understand that the Commission has a job to do but we sincerely believe that had our licences been renewed as expected we would have been able to apply to the Courts for protection under the Examinership procedures during which we could have restructured our business to take account of the market collapse," said Ms O'Sullivan.
"Not only that but we would have benefitted from the fact that the bond necessary to secure the licences going forward would have been approximately 40 per cent smaller than the €11.4 million bond currently with the Commission. The difference refunded to the company would have helped it to tackle its financial challenges," she added.
Budget Travel began a restructuring process in August of this year when it announced the closure of 14 of its retail outlets and the loss of 95 jobs. While that addressed some of the financial challenges the company was facing, the company said today it had not been sufficient to prevent the financial challenge escalating.
Fine Gael Tourism spokeswoman Olivia Mitchell said the closure of so many tour operators and travel agents, including Budget Travel, was bad news for Irish tourism.
"The requirement of tour operators to hold 10 per cent cash reserves, and of travel agents to hold 4 per cent, places them at a huge disadvantage with regard to internet holiday booking. A more even playing field must be legislated for before all such businesses go to the wall," she said.