Urgent talks in Kerry and Donegal after overnight collapse of Aer Lingus franchisee Stobart, which employed 480
Funding a replacement airline to run the regional routes that were operated by now collapsed Stobart could prove impossible, senior aviation sources have warned.
Under a franchise agreement with Aer Lingus Regional, Stobart operated State-subsidised routes from Dublin, Kerry and Donegal. It also ran connecting flights from Dublin to Manchester, Glasgow and Edinburgh.
Stobart’s 480 staff learned it was going into liquidation when they received an early morning memo from their managing director after last-ditch efforts to find cash to save the business failed.
Boss Andy Jolly wrote to staff yesterday to say the board had moved to appoint a liquidator.
Stobart’s main shareholder, UK infrastructure firm Esken, had advised management it was pulling its financial support “in the absence of any alternative purchasers, or any alternative sources of funding”.
In late April, Mr Jolly told staff that Ettyl Limited, a company based in the Isle of Man, had agreed terms to buy Stobart from Esken. Ettyl was a start-up virtual airline with no track record in the aviation business.
In yesterday’s memo, Mr Jolly said Ettyl advised Esken two weeks ago that “its original funding package to support the transaction was no longer available and that it was in discussions on alternative funding options”.
“Esken has yesterday evening, June 11, 2021, stated that it is now clear Ettyl is unable to conclude the transaction to acquire Stobart Air UC on the original terms, or to obtain an alternative funding package within the required timescale. Esken has therefore exercised its right to terminate the contract with Ettyl for the transaction with immediate effect,” he wrote.
Aer Lingus had previously carried out a review of its regional business and was reported in recent weeks to be in advanced talks with aviation entrepreneur Conor McCarthy’s Emerald Airlines. If successful, this would see Emerald take over the Aer Lingus Regional franchise operation from the end of 2022 when the Stobart contract was scheduled to end.
However, there is concern in aviation circles that Emerald will struggle to find a financial backer to cover the initial losses it would likely face in the current aviation climate.
“Stobart had been a basket case for a while and are now gone,” said an aviation source. “There is now talk that a deal with Emerald could move more quickly to replace the routes that have been lost. But Emerald can only do that if someone is prepared to write them a cheque to get the business going.”
Stobart’s bid to find this type of backing had proved fruitless. It would be surprising if Aer Lingus was prepared to provide this backing, as it had scaled back its own flights to regional airports in Europe in recent days, the source said.
“Aer Lingus is already losing a fortune. They are more dependent on the Irish market than any other carrier and they feel as if the Irish Government is ignoring the massive problems the sector faces.
“Aer Lingus is already letting their own people go and the unions in Aer Lingus would go absolutely ballistic if they try and write a cheque for an outsourced provider while their own people are losing their jobs.”
Aer Lingus apologised to customers yesterday and said Stobart Air informed it of the termination of the franchise agreement late on Friday night, leading to the cancellation of a number of regional flights.
This is likely to have serious knock-on implications for regional businesses.
Kerry Airport chief executive John Mulhern said discussions with the Department of Transport and the government chief whip, Kerry TD Brendan Griffin, about restoring its Dublin link began yesterday.
Kerry County Council said it will support Kerry Airport’s efforts to restore the Kerry-Dublin route, saying “it is critical to the economy of the county”.
Similar efforts were made at Donegal Airport yesterday, and Transport Minister Eamon Ryan said his department is examining the implications of the cancellation of the Government-funded public service obligation routes.
He said he was concerned about affected workers and insisted efforts will be made “over the comings days to restore connectivity to the regional airports”.
Labour transport spokesperson Duncan Smith called on the Government to do more to support the aviation sector given how it has been impacted by the pandemic.
“Workers and their unions have warned about this for months on the need for real and substantial support for the sector,” he said.