Mr. Brian Kealy:

We thank the committee for inviting us to present on behalf of the trainee pilots whose careers were devastated when the Pilot Training College of Ireland, PTC, collapsed five years ago. Our presentation will address the background of the collapse and the level of investment in education the trainee pilots made, the collapse of PTC in the summer of 2012 and how much was lost by the trainee pilots, developments since the collapse, concerns we have about regulatory oversight of PTC and the human consequences, which Ms Kealy will cover.

PTC operated a pilot training business in Waterford as well as a Florida facility associated with the Florida Institute of Technology, both approved by the Irish Aviation Authority, IAA. The IAA oversaw the safety standards and training of the company as well as ensuring that there were sufficient resources to carry out training to the required standard. Generally students did the early part of their training in Florida, where clear skies were usually available, before completing training in Waterford. Training was provided to retail or self-funded students and airline-sponsored students. Training was supposed to take approximately 14 months and cost between €80,000 and €90,000. No State support or subsidy was available. Fees were collected over the first seven months of the course even if the training schedule was falling behind. The company was quite aggressive in ensuring collection. Fees were not bonded. Although that issue was considered after the collapse, the Minister at the time decided not to require bonding as a result of concerns that training firms would leave Ireland. Prospective students and their sponsors would have taken comfort from the IAA approval and also an investment in the company by Enterprise Ireland.

PTC ceased training students in late June 2012 and the IAA suspended its approval as a flight training organisation on 3 July 2012. The company initially went into examinership in July. The examinership was not successful and liquidation was initiated in late September 2012. While liquidation has not yet finally concluded, there will be nothing for the students. A total of €7.7 million net fees, in respect of which no training was delivered, had been prepaid at the date of the collapse. A figure of €8.4 million gross was due as the company claimed that €700,000 was owed to it by some individuals. At the same date, the company had an estimated deficit of €7.2 million. Essentially, the students paid for the failure. The 60 or so students we represent were among those most impacted upon and were owed €2.6 million. In total, 300 students were affected, including some whose training was airline-sponsored.

The €7.7 million net owed as at June 2012 compared to €3.6 million owed in December 2010. In the intervening 18 months, the company lost €5 million. That situation was not helped by advertising costs of €1.2 million incurred in 2011 alone, as the company aggressively tried to expand. That effort failed with the company having essentially used prepaid student fees for training it could never afford to deliver. It would appear that the company had no cash and was instead relying on prepaid fees to pay its way.

Hardly any cash has been realised since the liquidation which commenced in September 2012, not even enough to pay the liquidator. The parent company of PTC, Shemburn, owed PTC €1.6 million and was subsequently liquidated. However, little value was realised from the company and nothing is expected to go to PTC. The liquidator of PTC sought to restrict directors of the company through High Court proceedings in February 2016 before Judge Haughton. The proceedings resulted in the managing director and main shareholder being restricted from acting as a company director for five years. Judge Haughton was very sympathetic in his approach but was not in a position to do anything for the students because the company had no money.

A range of complaints were made by students and their sponsors to the Garda bureau of fraud investigation but no action has been taken to date. In October 2012, Following a meeting with the Irish Aviation Authority in October 2012, this committee indicated it would undertake a forensic investigation of the collapse. However, that decision was subsequently reversed when the committee met in private session.

PTC and its sister operation in Florida were approved by the IAA, which undertook a review in September 2011 as part of its renewal and review process, during which additional financial information was sought. PTC's approval was renewed in spite of its precarious financial position. The additional information was requested pursuant to a section of the regulations which deals with concerns about the lack or apparent lack of financial resources.

Freedom of information disclosures show that the IAA reviewed the company accounts of Shemburn, the parent company of PTC, although these were not the group accounts because they did not consolidate its subsidiaries. It was solely the company accounts. Shemburn had a €1 million reported net worth at December 2010. The IAA noted that Shemburn did not have qualified accounts. However, Shemburn was not the entity it was approving for flight training. A review of PTC’s accounts would have shown a €2 million deficit at December 2010, €3.6 million owed to students and a serious qualification of the accounts which stated that the conditions in being at the time indicated the existence of a material uncertainty which may have cast significant doubt over the company’s ability to continue as a going concern. PTC could only survive by collecting fees upfront to fund training which had already been paid for by other students. The IAA director of safety regulation stated at a committee meeting in October 2012 that many flight training companies are like Ponzi schemes. A review of the PTC accounts would have shown this to be the case. PTC was borrowing from Peter to pay Paul. In view of the fact that PTC had little or no cash, how could the IAA have concluded that it had the resources to carry out pilot training to the required standards? The IAA showed excessive forbearance in allowing it to continue to operate. One of the objectives of the IAA was to promote aviation education and training in Ireland and it formed College Ireland in 2010 to further that aim. In addition, Enterprise Ireland injected stabilisation funds of almost €400,000 into PTC in 2010 by way of preference shares. Unfortunately, that investment was lost. The desire to promote companies such as PTC almost certainly resulted in forbearance when hard decisions were required. The problem with that is that it was the students’ moneys that were at risk and ultimately completely lost.

The Minister noted in 2012 that students would have lost money no matter when intervention, including the withdrawal of approval, occurred, implying that earlier intervention was contemplated. Such earlier intervention would have resulted in reduced overall losses as sums owed for training due increased dramatically from €3.6 million to €7.7 million in the final 18 months of the company's operation.