Owner of Southend Airport says it's still solvent despite losing Aer Lingus contract

Stobart Group, the owners of Southend Airport, says it will still be able to borrow from lenders. Credit: Stobart Group

Stobart Group says it will continue to have sufficient funds to meet its liabilities as they fall due despite losing an important contract to fly passengers on behalf of Aer Lingus. On Friday evening, the company informed staff at its airline, Stobart Air, that it had lost out in a bid to extend the current franchise agreement beyond the end of 2022. Aer Lingus has instead entered into exclusive talks with Emerald Air to run flights between Ireland and the UK from 2023 - 2032. This a significant setback for Stobart Group which is hoping to offload Stobart Air. The airline, like many others, is currently heavily loss-making as a result of the coronavirus pandemic. Stobart Air has 15 aircraft. Most of the fleet is currently grounded but before the Covid-19 outbreak 13 were involved in the regional Aer Lingus service. Stobart Group caused surprise back in April when it decided to reacquire the airline from the administrators of FlyBe.

Stobart Air staff were informed on Friday. Credit: Stobart Group

At the time, Stobart Air’s managing director, Andy Jolly, explained that Stobart Group had little choice. “They [Stobart Group] only prevented us going into receivership as a consequence of their self-interests, as they would have gone out of business,” Jolly said, according to a report in the Irish Independent. Stobart Group is exposed to up to $108m (£78m) of liabilities relating to Stobart Air, principally through eight aircraft lease and maintenance commitments with a company called Goal in Germany that last until 2027. In a statement on Saturday morning, Stobart Group revealed that it has the right to exercise an early break clause in the lease contracts “at a cost to the group of $21.2m (£16m) plus finance and maintenance costs.” Warwick Brady, CEO of Stobart Group, said: “The group remains in positive discussions with a number of interested parties and continue to target an exit from Stobart Air before the end of the current financial year [Feburary 2021].” Last week Stobart Group reported a pre-tax loss of £77.4m for the six months until the end of August. This included a write down of £55 million on the value of Stobart Air, which has 500 staff. Stobart Group said is it also burning through cash, at a rate of £5.6 million a month in August (£3.6m of which was down to the airline). The group reported having a cushion of £119 million in “cash and undrawn banking facilities.”

Stobart Group own Southend Airport. Credit: PA

Stobart Group’s share price has fallen from 110p at the beginning of the year to 25p. A key part of the board’s plan to revive the group’s fortunes is to find someone to take on Stobart Air and its liabilities. That task has become much more difficult with the loss of the Aer Lingus contract. A spokesperson for Stobart Group told ITV News that the directors stand by their assessment on 5th November that the business is a going concern and insisted that Warwick Brady has no plans to stand down as chief executive. They added that the loss of the Aer Lingus contract will not affect the group’s ability to borrow from its lenders. In addition to the airline, Stobart Group owns London Southend Airport, Carlisle Lake District Airport.

It has an Aviation Services division - operating check-in, baggage handing and check-in services at Stansted, Manchester, Edinburgh and Glasgow airports - and operates an energy business. In August, EasyJet closed its base at Southend Airport and cancelled all passenger flights. Last year Easyjet carried around half of everyone who passed through Southend.