Eastern Airways rescue sale collapses as administrators turn to piecemeal asset disposals

A proposed going-concern sale of Eastern Airways and connected company Air Kilroe has collapsed after the preferred bidder withdrew from exclusivity and stopped funding the transaction, leaving administrators to sell the regional airline’s remaining assets individually.

Jamie Miller and Gareth Harris of RSM UK were appointed as joint administrators of Eastern Airways in November 2025 after the carrier suspended operations and made most of its approximately 330 employees redundant. The administration followed the loss of a major KLM Cityhopper contract, which left the airline unable to reduce its cost base quickly enough to offset the resulting revenue decline.

RSM’s first progress report shows that the administrators initially marketed Eastern and Air Kilroe together because the companies operated as a single business in practice. Air Kilroe held the Civil Aviation Authority licences, aircraft and other key assets, while Eastern employed the workforce and carried out the day-to-day operations.

The administrators secured £700,000 of funding from Gordon Brothers Asset Ingenuity to mothball the business, retain key employees and continue maintenance while they pursued a sale. Seven indicative offers were received following a marketing process launched on 10 November 2025, with four parties submitting final offers. The administrators selected a preferred bidder and entered exclusivity on 21 December. The bidder paid an approximately £286,000 non-refundable contribution toward the companies’ costs and agreed to fund operations until completion, but withdrew from exclusivity on 8 January 2026 and stopped providing further financing.

RSM said no alternative going-concern purchaser could be found despite renewed discussions with interested parties. The administrators have therefore abandoned the rescue strategy and are realizing the assets of Eastern and Air Kilroe separately.

Air Kilroe owned nine unencumbered Jetstream 41 aircraft, which the administrators described as the largest remaining J41 fleet in the world. Gordon Brothers marketed the aircraft following a commercial valuation, while the company’s remaining employees continued preserving the fleet and maintaining regulatory compliance.

The fleet has now been sold to an unrelated third party under an asset purchase agreement. The purchaser also acquired Air Kilroe’s associated J41 rotables and stock. The confidential consideration is payable in two tranches, with an initial payment of £950,000 received during the reporting period.

Air Kilroe separately sold aircraft parts to an unrelated components dealer for $850,000, equivalent to approximately £629,000. The proceeds were initially paid into Gordon Brothers’ client account and are expected to be transferred to the administration estate.

The company’s remaining aircraft had been leased and were repossessed by their lessors. RSM expects the lessors to suffer shortfalls after applying the value of the returned aircraft against claims totalling approximately £19.6 million.

Eastern retained 51 employees following the initial redundancies to safeguard assets, preserve the aviation operation and maintain regulatory compliance. Further redundancies have since reduced the workforce to 16, with the remaining employees expected to leave once the realization process is complete.

The administrators have recovered £42,525 from Eastern’s debtors and approximately £73,430 from other realisations, including flight simulator income and refunds. Eastern’s Jetstream 41 simulator generated £26,901 from pilot training during the reporting period, but the arrangement became loss-making because Eastern was responsible for the simulator’s operating costs. The simulator has been non-operational since April, and RSM is considering options with its owner.

A significant potential recovery for Eastern is a £20.6 million intercompany balance owed by Air Kilroe. Air Kilroe’s administrators currently estimate net property of approximately £294,000 and a prescribed part of about £62,000, although recoveries remain dependent on the aircraft and parts sales, insurance claims, a £1.2 million HMRC VAT refund and final administration costs.

Santander is owed approximately £6.9 million by Eastern and is expected to suffer a shortfall. Employee preferential claims of approximately £388,000 are currently estimated to be paid in full, while HMRC’s £1.56 million preferential claim is projected to receive about 28 pence in the pound. Eastern’s unsecured creditors, owed approximately £20.17 million, are not expected to receive a dividend.

Read the Eastern Airways report HERE, and the Air Kilroe report HERE.