Monday 17 December 2018

Stobart eyes spin-off of Dublin-based aviation unit in group reshuffle plan

Stobart CEO Warwick Brady. Photo: Maxwells
Stobart CEO Warwick Brady. Photo: Maxwells
John Mulligan

John Mulligan

UK transport and energy group Stobart is understood to be considering hiving off its Dublin-based Stobart Aviation unit as a separate entity - just months after bringing it into the group fold.

Stock-market-listed Stobart indicated last week that it was assessing possible new structures for its aviation arm that would allow the unit to secure investment in order to pursue consolidation opportunities.

Stobart Air operates the Aer Lingus Regional service on a franchise basis, and also has a franchise agreement with UK regional carrier Flybe to operate routes including a new service between Dublin and London Southend Airport that starts next weekend.

Warwick Brady, Stobart Group CEO, told the Irish Independent last week that Stobart did not want to "miss out" on consolidation opportunities if they arose, but declined to say what the new structure might be.

Stobart Group owned 45pc of Stobart Air before it wholly acquired it. Invesco Perpetual owned 40pc and broker Cenkos held 10pc. Former Aer Arann chairman Pádraig Ó Céidigh owned 5pc. Invesco owns 27pc of Stobart Group.

The previous Stobart Air shareholders were bought out by Stobart Group as it took full ownership of the business last year.

Stobart Group - which has a £940m (€1bn) market capitalisation - also took full control this year of Propius, an aircraft-leasing unit that housed aircraft operated by Stobart Air. Aer Lingus was a shareholder in Propius. In April, Stobart completed a sale and leaseback of the Propius ATR turboprop aircraft with German firm GOAL.

Separating out Stobart Air could pique the interest of investors such as fund manager Neil Woodford. He owns a near 20pc stake in Eddie Stobart, the logistics business that was spun out of Stobart Group and listed on the stock market this year. Woodford Investment Management also owns about 20pc of Stobart Group.

Stobart Group might also be keen to complete a separation of the aviation business before the end of December. Doing so would mean that a big chunk of the losses that would be incurred by Stobart Air over the lean winter months - many airlines typically lose money in winter - would not hit the Stobart Group balance sheet for its current financial year, which ends in February.

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