Highland Airways goes into administration

Highland Airway's website carries a message to customers

A Scottish airline has been placed in administration, it has been announced.

Highland Airways called in PricewaterhouseCoopers on Wednesday night to take over the running of the business, which also operates in Wales.

Most of the company's 100 staff will lose their jobs. All of the airline's Thursday flights have been cancelled.

MP Danny Alexander said HM Revenue and Customs (HMRC) had been unwilling to help the company. HMRC said it could not comment on individual cases.

The Inverness-based airline's problems came to light at the start of the year after severe weather led to cancelled flights and worsening debts. Its board voluntarily placed the business into administration.

The Civil Aviation Authority (CAA) said operations had been suspended "with immediate effect".

It is inevitable that there will be a substantial number of redundancies Bruce Cartwright PricewaterhouseCoopers

The Scottish government said it was a "great disappointment" the company had gone into voluntary administration.

It added that efforts were being made to find an alternative operator of the Scottish services.

Highland Airway's website shows a single page with a message telling customers that it has gone into administration, but to keep checking the site for updates.

It had been hoped a new investor would be found to help the firm survive.

PricewaterhouseCoopers said its appointment was made at the request of the company's directors.

Inverness, Nairn, Badenoch and Strathspey Liberal Democrat MP Danny Alexander said HMRC had not "lived up to its promise to support businesses through the recession".

Nationalist Western Isles MP Angus MacNeil also said he would look at the role played by the airline's creditors, including HMRC.

A spokesman at HMRC said: "We are unable to discuss individual cases due to taxpayer confidentiality."

The organisation offers the business payments scheme to companies in difficulty, but firms are obliged to meet repayments.

Not 'viable'

Bruce Cartwright, joint administrator and head of business recovery services at PricewaterhouseCoopers LLP in Scotland, said: "The company had encountered trading difficulties including the loss of certain contracts.

"As a result they were in discussion with a number of parties over a period of time with a view to developing a new and viable operating model. The directors have now concluded that the option of maintaining operations while introducing a new investor is no longer feasible.

"As administrators we are conscious that Highland provided a valuable service within Scotland and Wales and we will be working with contracted customers to ensure an orderly handover of services to new operators wherever feasible.

"It is inevitable that there will be a substantial number of redundancies but we will endeavour where feasible to assist the work force in securing employment with the new service providers."

Highland Airways operates in Scotland and Wales

The airline held a CAA operating licence and air operating certificate.

The CAA said: "Whilst the administrator is reviewing the position the company is not expected to resume services in the near future and is contacting passengers who were due to travel to advise them to make alternative arrangements.".

It is thought the firm's 100 staff were called in at about 0700 GMT to be informed of the decision

Highland Airways operated a fleet of nine aircraft, running services between Cardiff and Anglesey, Stornoway and Benbecula in the Outer Hebrides and Oban and the Inner Hebrides.

Other activities include aerial work, newspaper delivery to some Scottish islands, corporate staff shuttles and air charter.

So far no-one from the company has been available for comment.

However, the airline is in contact with passengers who had been expecting to travel in the coming weeks.

'Deep regret'

The CAA said the company was not protected by the Atol scheme administered by the CAA and passengers who booked directly with the airline would not be covered.

However, if passengers paid the airline directly by credit card or a Link debit card they may be protected by the Consumer Credit Act.

If passengers booked their ticket through a travel agent they should speak to the agent.

Highlands and Islands Enterprise (HIE) said it "deeply regretted" that the airline had been unable to recover from its difficulties.

The public agency invested £620,000 to support a management buy-out of the company in 2007.

HIE provided a further £103,000 grant assistance in 2008 to support a fleet expansion. It received an interest payment of £41,780 in 2008 as a return on its original investment.