Stobart looks at shake-up to get investors on board
THE British transport and energy group Stobart, whose aviation arm operates the Aer Lingus Regional service, is eyeing a new structure for its aviation unit.
The move would enable it to bring on board potential investors if it seeks to capitalise on consolidation in the European aviation sector, chief executive Warwick Brady has confirmed.
Speaking to the Irish Independent as stock market-listed Stobart released interim results, Mr Brady declined to say what specific structure is envisaged.
"It's looking at alternative financial structures that put us in the best position to not miss out on any consolidation," said Mr Brady, a former EasyJet executive.
"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," he said.
"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's been previous industry speculation that UK regional carrier Flybe and Stobart Air could be a natural fit for each other. Stobart Air already has a deal to operate routes on a franchise basis for Flybe.
Shares in Flybe slumped on Wednesday after it issued a profit warning, blaming higher than expected aircraft maintenance costs.
Until earlier this year, Stobart Air had been a completely separate division with a mix of financial investors.
But Everdeal Holdings, the company behind the operation, is now wholly owned by Stobart Group and was brought under the group umbrella.
It also took full control of an aircraft-leasing arm connected to the business.
"We've cleaned it up, it's now profitable," said Mr Brady of Everdeal. "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 and added that the performance of the operation during the summer had been strong.
"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."
Under its franchise agreement with Flybe, Stobart Air will launch a service between Dublin and London Southend Airport on October 29 using an Embraer 195 jet.
The group said revenue in the first six months of its financial year jumped to £124.6m from £64.3m as it benefited from £123.9m of profits from the sale of assets in the period.
Earnings before interest, tax, depreciation and amortisation consequently increased to £131.8m from £20.2m a year earlier.