Published on October 22nd, 2017 | by Mark Dwyer0
Strong Results for Stobart Group
Half year results to 31st August 2017 were very strong for the Stobart Group with massive profits and an increased dividend but these turn out to be generated by the sale of part of its stake in Eddie Stobart Logistics. None of the operating divisions generated major profits or losses but the sale left the Group with net cash of £2.9m.
Aviation Division turnover (Stobart Air and Southend Airport) was £97.5m with an underlying EBITDA of £6.2m and underlying profit before tax (before central charges) of £1.7m.
Announcing the results, the Group said that they were “reviewing alternative structures for our airline and leasing business that can play an important part in the consolidation of the regional airline sector”. This is the approach taken by Cityjet over the last two years which has seen it move away from operating its own scheduled services and move into leasing. The Stobart Group has acquired 3 Embraer 195 aircraft which are leased to Flybe until mid 2018.
Stobart Group CEO Warwick Brady told John Mulligan at the Irish Independent “We’ve cleaned it up, it’s now profitable, the leasing business is working well. The Aer Lingus franchise is really working well.” He confirmed that the Aer Lingus Regional service should carry about 1.5 million passengers this calendar year. “We’ve really got down to the nuts and bolts of that business,” he said. “We tweaked the network in terms of the schedule. We took some capacity out from under-performing routes, and we’ve been ruthless in making sure we’re a very lean business.”
The results for Stobart Air “operating under the valuable Aer Lingus franchise” are ahead of expectations after strong summer trading. The winter booking profile and yields achieved so far for the six-month period to February 2018 are meeting management expectations.
Eight ATR-72 600s were sold and leased back for proceeds of US$148m. The lease contract is for 10 years with an option to terminate after 6. Aggregate payments under the leases are $15.4m pa. The Group will continue to operate all 8 within its airline, primarily providing flights under the Aer Lingus franchise agreement.
ATR-72-600 EI-FMJ was painted in FlyBe colours last week at Shannon by International Aerospace Coatings (IAC). It previously operated in Aer Lingus Regional colours, is this a reflection of a static Aer Lingus Regional network?
“If there is consolidation, we don’t want to miss out. We’re a small player. We’ve only got 17 airplanes going to 20 airplanes,” said Mr Brady. “We’ve got a strong balance sheet, but the question is, what other financial partners could effectively be part of our structure that would support any transaction?” There has been industry speculation that UK regional carrier Flybe and Stobart Air could be a natural fit for each other.
Mr Brady poured cold water on the idea saying, “We’re focusing on our regional business, making it a valuable attractive business. We’re not looking at it at the moment.”
He went on to outline the likelihood of route growth with the Aer Lingus brand. “I think you’ve got to have to see route growth. Because we’ve got an exclusive contract that has route deliver passengers in Dublin, I think we’re going to have to find a way to increase capacity with Aer Lingus.”
Mr Brady told The Irish Times “(Aer Lingus) are going to need (us), whether they want it or not. If you’re going to put on new transatlantic routes and you want to get people to Edinburgh, you’re going to need more capacity to Edinburgh and we’ve got an agreement that only we’re going to fly Edinburgh with Aer Lingus.”
London Southend Airport
The other part of the Aviation Division, London Southend Airport, announced passenger numbers through the airport in the five months to 31st July were 482,000, up 22%. The airport has also announced a reinstated route to Antwerp (4 per week by Stobart Air ATR-72 competing with multiple daily Embraer jets on BA CityFlyer from London City). Stobart Air is to base a 5th aircraft at the airport and easyJet a 4th.
Stobart Jet Centre
Stobart Aviation is to open Stobart Jet Centre at Southend in November. It will offer guests and pilots a smooth, premium experience with 24/7 access for 364 days a year and departure routes outside London’s crowded airspace. The centre is expected to cater for 5,000 private flights per year by 2022, and will be open 24/7 for 364 days a year.
The airport is 42 miles from the centre of London, while chauffeur transfers are under an hour by road to central London, there are also helicopter transfers to and from Canary Wharf or Battersea Heliport. The airport is also hoping to prove competitive when it comes to landing, parking and handling prices. To park a Boeing BBJ at the airport for 24 hours will cost £1,000, which London Southend says is seven times cheaper than some other London airports.