Published on June 8th, 2016 | by Jim Lee0
As Stobart Air’s Chief Executive, “concludes his role at the airline” what now for this Aer Lingus Regional airline?
In a brief statement on 12th May, Stobart Air announced that its board and the airline’s Chief Executive, Mr. Seán Brogan, had agreed “that Mr. Brogan will conclude his role at the airline”. It added that the board would now commence the process of identifying a new Chief Executive for the airline and that Mr Brogan would stay on as Chief Executive, for an interim period, “to ensure that all the necessary regulatory requirements are in place for a smooth transition, working in partnership with the Irish Aviation Authority (IAA)”.
In a comment Stobart Air Chairman, Andrew Tinkler, said: “On behalf of the board and shareholders, I wish to express our appreciation of Sean’s contribution to Stobart Air. He has been an integral part in driving the airline’s transformation over recent years, which has seen Stobart Air become an established force in the aviation sector. The airline has a strong team, at all levels, and we look forward to continuing our growth story. We thank Sean for his contribution, and wish him continued success into the future.”
Mr. Brogan added: “I wish to thank the board, shareholders and all of my colleagues at Stobart Air for their support during my time at the airline. With strong shareholder backing, we have grown the airline from examinership to profitability, building its team, network, routes and passengers year-on-year. Now is the right time for me to step away to pursue new challenges, and I look forward to the next stage of my career. I wish everyone at Stobart Air continued success.”
The reference to a smooth transition and the need to work in partnership with the IAA to ensure that all the necessary regulatory requirements are in place arises from IAA concerns, regarding recent boardroom changes. The IAA would not comment on what contacts had been made with Stobart, only to confirm that it is, “in regular contact with all airlines concerning safety and security matters”. An earlier statement added: “As happens regularly, where takeovers or management changes occur, the IAA must be satisfied that transitions occur in a safe manner to ensure organisational effectiveness is maintained. Airlines regularly change management and the IAA maintains open dialogue with all parties in these cases to ensure that all parties understand the regulatory responsibility.”
Resignation comes after takeover bid rejected
Mr. Brogan’s resignation comes in the wake of the decision by the board of Stobart Air to reject a reported €65 million management buy-out (MBO) proposal. It is commonly believed that Aer Lingus would have been favourably disposed towards a MBO of Stobart Air. Following rejection of the bid, tension between Mr. Brogan and Stobart Air’s newly appointed chairman, Andrew Tinkler, are reported to have risen, leading to Mr, Brogan’s departure. Mr. Tinkler, who is also Stobart Group’s CEO, replaced Tim Jeans, a former senior executive at Ryanair and Monarch, following his resignation at the end of April. Mr. Jeans joined Stobart as a non-executive chairman two years ago, when the airline made a number of changes, that included appointing Julian Carr, as managing director, and Sean Brogan as chairman. However, Mr Carr left in late 2014. Mr Jeans became chairman in October 2015 and Mr Brogan stepped back into the role of chief executive, in which he had been acting, before Mr Carr’s appointment.
The MBO bid led by Mr. Brogan was among three known offers submitted for Stobart Air, since news broke last year that its majority shareholders, UK logistics specialist Stobart Group (45%) and investment manager and broker Invesco Perpetual (40%), were considering selling off their combined 85% shareholding, in the airline. The other shareholders are broker, Cenkos, with a 10% stake and former Aer Arann chairman, Pádraig Ó’Céidigh, who owns 5%. One of the other bids reportedly included the Dublin-based, Aviation Finance Company.
Options now for Stobart Air?
Whatever happens at Stobart Air, Aer Lingus is a key player, not only because Stobart runs the Aer Lingus regional network under a long-term franchise deal, that is central to its business, but also because of the Aer Lingus stake in Propius Holdings, which was used to acquire and lease-back aircraft used by Stobart Air. Each side needs the other and Aer Lingus will want to know what the plans are for Stobart Air’s future.
One option that has been suggested is that there could be a tie up with CityJet. This would involve CityJet taking a substantial majority stake in the merged business, with existing shareholders in Stobart Air, retaining a small minority. It should be noted that both Stobart Air and CityJet have been loss-making in recent years, although both companies have stated that they expect to be profitable in the current year. In addition, the Stobart Group have confirmed that the airline returned to profitability in 2015. A key question however, is where the finance would come from.
With the management buyout apparently now off the table, Stobart Group is reportedly considering assuming full control of the Stobart Air by acquiring Invesco Perpetual’s 40% stake. It is also thought that a merger deal envisages Aer Lingus cutting its stake in Propius Holdings. Another investor would then take an up-to-66% majority stake in Propius.
If Stobart Group does take full control, then the next question is whether the suggested attempt to merge into a bigger group, with CityJet would go ahead? This will pose a number of issues for Aer Lingus and its parent IAG. Could it envisage a situation where the company running its regional service merged with CityJet, a competitor on the key Dublin-London route and which also provides competition to Paris? However, there are many advantages that such a merged entity would bring, giving Aer Lingus options on thin airport pairs where an in-house Aer Lingus A320 operation is not sustainable, and where Stobart Air’s ATR72s, may not be suitable. Could we yet see CityJet Sukhoi SSJ 100-95 Superjets operating in Aer Lingus colours? If IAG gives the nod, this could yet become a reality.
What the Stobart Group wants from the airline
The Stobart Group acquired its stake in what was then Aer Arann Regional, when the airline emerged from examinership, in 2010. It planned to use Stobart Air to develop the Group’s London Southend Airport into a major hub, but results have not lived up to expectations. Instead, British budget carrier easyJet and commuter airline Flybe are dominant there, while Stobart Air has grown the network that it operates for Aer Lingus instead. Overall it carried over 1.4 million passengers during FY2016 and continues to grow.
Mr. Tinkler is keen to introduce scheduled passenger flights from Carlisle Airport, which is also owned by the Stobart Group, following the announcement by the UK’s Chancellor George Osborne in his Autumn Statement, that proposed routes from Carlisle to London Southend, Dublin and Belfast, would receive a start-up subsidy, from the UK Government’s Regional Air Connectivity Fund. He hopes that the services will be operating by early next year and revealed that Stobart would also receive grant funding towards runway improvements, which must be completed before scheduled passenger services can start.
In a comment he said that “our aim is to carry out those works and get it up to Civil Aviation Authority standards this summer, and have the airport ready for scheduled flights by October” and added that “we might start them then but it may be better to wait until the spring, given that it takes time to sell airline seats. We will see how it goes.”
His comments followed the completion of the sale of Stobart Group’s 315,000 ft² (29,265 m²) distribution centre at the Airport, for £16.925 million (around €21.65 million) in cash, marking the successful conclusion of the first phase of development, at Carlisle airport. The Airport covers 460 acres (186.2 hectares) of land, of which 212 acres (85.8 hectares) are required to operate the airport. Stobart Group acquired it in May 2009 for £9.9 million (around €12.66 million) in order to develop the remaining 248 acres (100 hectares) for logistics, aviation-related and other purposes, as well as developing passenger services at the airport. They believe there is the opportunity for Stobart Air to “create passenger air services, attracting business customers who require fast, effective transport links and giving tourists more efficient access to Cumbria and South West Scotland.”
Stobart Air fleet
Stobart Air operates two ATR42-300s and fifteen ATR72-200/-500/-600s, all of which are in service under the Aer Lingus Regional franchise agreement and franchise and wet-lease deals with flybe. The airline has also been wet-leasing Danish Air Transport ATR72 OY-RUG, which was ferried Kaunas-Dublin on 27th March 2016, as STK100P. It operated its first service later the same day, operating Aer Lingus Regional flight, EI-3216, from Dublin to the Isle of Man. Three of fifteen ATR72’s have been delivered over the last few months namely ATR72-600s, EI-FMJ (c/n 1295) on 27th November 2015, EI-FMK (c/n 1297) on 18th December 2015 and most recently EI-FNA (c/n 1325) on 29th April. This latter aircraft was delivered from Toulouse to Dublin as the STK100P and entered service on 1st May, operating Aer Lingus Regional flight, EI-3258, from Dublin to Edinburgh.
Only one aircraft, ATR72-201, EI-REH is in full Stobart Air colours, while EI-FMK wears an all-white colour scheme and EI-REI is similar, but with Aer Lingus Regional titles. Ten aircraft are in full Aer Lingus Regional colours namely, EI-FAS, EI-FAT, EI-FAU, EI-FAV, EI-FAW, EI-FAX, EI-FCY, EI-FCZ, EI-FMJ and EI-FNA, while the remaining two ATR72s, EI-REL and EI-REM, are in the Flybe purple c/s. They are on lease to Flybe since 25th October 2015 and are usually based in the Isle of Man. A further Danish Air Transport ATR72, OY-RUB, has been leased for the Flybe franchise, from 28th May.
Of the two ATR42-300s, EI-CBK is in Aer Lingus Regional colours, while EI-EHH wears a basic white c/s.
Stobart Air/Aer Lingus Regional Summer 2016 schedules
Aer Lingus Regional operations to the UK provincial cities form the bulk of the Stobart Air operations. Two routes are shared with the Aer Lingus short-haul operation, using Airbus A320s, namely Dublin-Birmingham and Dublin-Manchester. Dublin-Birmingham has a basic four per day schedule, with 19 A320 services and nine ATR72 services, (mainly on the EI-3264/5, EI-3272/3 and EI-3276/7), while Dublin-Manchester has 35 services per week, with 20 with A320s and 15 with ATR72s, (mainly on the EI-3320/1, EI-3322/3, EI-3326/7 and EI-3228/9). Aer Lingus Regional ATRs have also taken over operation of the Dublin-Liverpool route, with effect from 2nd May. This operates at a basic four per day frequency, but with three services on Saturdays, making a total of 27 per week. This route only started in October 2015 with A320s operating at a 16 per week frequency. All three routes face competition from Ryanair, using Boeing 737-800s.
Looking next at England and Wales, Dublin-Bristol has three services a day, apart from Saturdays, when there are two, for a total of 20 per week. Flight numbers are in the EI 3280-87 range. Dublin-Cardiff has a daily except Sunday morning service, a weekday evening service and a Sunday afternoon service, for a total of 12 per week. Flight numbers are in the EI 3290-99 range. Ryanair operates on the Bristol route while Flybe operates on the Cardiff route using Embraer EMB 195s.
Dublin-Leeds/Bradford has a daily morning service and a daily except Saturdays evening’s service, for a total of 13 per week, (the EI-3390/1, EI-3392/3 and the EI-3394/5). Dublin-East Midlands (Nottingham), has a daily service but at various timings, with two sets of flight numbers, the EI-3382/3 and the EI-3384/5. Dublin-Newcastle route has 15 services a week with flight numbers in the EI-3350/7 range. All three routes face competition from Ryanair, using Boeing 737-800s.
Dublin-Newquay has a peak daily service (EI-3930/1); up from five per week last year while Dublin-Doncaster/Sheffield has a daily, except Wednesday service, up from five per week, last year. Flight numbers are EI-3410/1 and EI-3412/3. There are no other operators on these routes.
Turning to Scotland, the Dublin-Glasgow route has 33 services a week, with flight numbers in the EI-3220/31 range, while Dublin-Edinburgh has 34 services a week, with flight numbers in the EI-3250/59 range. Both routes face competition from Ryanair, using Boeing 737-800s. Finally, Dublin-Aberdeen has a daily service, the EI-3240/3, which is the same as last year.
The Donegal Carrickfinn-Glasgow route, which is integrated with the Dublin-Carrickfinn Public Service Obligation (PSO) service, is being operated at a four per week frequency, (EI-3444/7), the same as last year. The two domestic PSO routes are Dublin-Kerry, (EI-3202/1, EI-3204/5 and EI 3208/7) and Dublin-Carrickfinn (EI-3402/1 and EI 3408/3), both operating twice daily.
The Dublin-Isle of Man has 12 services a week (EI-3212/3, EI-3214/5 and EI-3216/7), a similar pattern as previous years, while Dublin-Jersey has seven services a week, with no service on Wednesdays, but two on Saturdays (EI-3342/3 and EI-3344/5).
Further afield, Stobart Air also operates an Aer Lingus Regional route from Dublin to Rennes, located in the east of Brittany in north-western France with a flight distance to Dublin of 419 miles (675 km). For summer 2016, the route is operated at a twice per week frequency, (Wednesdays EI-3906/7 and Saturdays EI-3904/5). The flight time varies between 2:00 and 2:10.
Cork has a range of services to UK provincial cities. Cork-Birmingham has a daily morning service (EI-3700/1) and a daily except Saturday evening service (EI-3708/9), for a total of 13 per week, while Cork-Bristol has a standard daily service (EI-3842/3). Cork-Manchester has a daily morning service (EI-3722/3), a Friday afternoon service (EI 3726/7) and a daily except Friday evening service (EI 3728/9), for a total of 14 per week. A Cork-Southampton route commenced on 14th March, continues at a five times per week frequency (EI-3740/1), while a three times weekly (Tuesday, Thursday and Saturday, the EI-3760/1) Cork-Leeds/Bradford route, started the following day is maintained. Cork-Newcastle operates four times per week, as the EI-3866/7, at various timings, while Cork-Jersey is twice weekly, on Wednesdays as the EI-3924/5, and on Saturdays as the EI-3922/3. On the two Scottish services, Cork-Edinburgh has a daily service, the EI-3806/5, while Cork-Glasgow has five per week (EI-3832/3) frequency.
Unfortunately, most of the Aer Lingus Regional routes from Shannon have been dropped. The only remaining route is Shannon-Birmingham, the EI-3638/9, which is being operated at a six per week frequency from 18th June. Routes operated to Bristol, Edinburgh and Manchester last year from Shannon have been dropped.
Stobart Air’s Flybe franchised operations
Stobart Air are operating all of Flybe’s schedules from the Isle of Man serving Birmingham, Liverpool and Manchester, with effect from April 2016, using two based ATR72s, supplemented by other aircraft as required. The routes from the Isle of Man are, to Birmingham (six per week as the BE-193/4), Liverpool (11 per week as the BE-603/4 and BE-607/8) and Manchester (six per week with various flight numbers). Flybe also operates services from Southend to Caen (five per week as the BE-6050/1), Groningen (six per week as the BE-6034/5) and Rennes (13 per week with flight in the BE-6020/25 range).