Stobart still plans airline exit despite Aer Lingus setback

Carlisle-based aviation and energy infrastructure firm Stobart Group said on Monday it still intends to divest its regional operator Stobart Air by the end of the financial year — despite Aer Lingus deciding not to renew a franchise agreement with the company.

Stobart Group shares rose about 6% on Monday, but its stock price has fallen about 75% over the past 12 months.

Stobart Group owns and operates Southend Airport and Carlisle Lake District Airport and the firm has vowed to become a “pure play airport and aviation services business.”

In a stock exchange statement on Monday, Stobart Group said: “Stobart Group, the aviation and energy infrastructure group, has received notification that Aer Lingus has informed Stobart Air that it is not the preferred supplier for a new commercial agreement which would have commenced in January 2023.

“Stobart Air will continue to operate the Aer Lingus franchise until that time.

“Should Stobart Air not be awarded a new commercial agreement, Stobart Group can exercise its right to an early break clause for the lease agreement of eight ATR aircraft in April 2023 at a cost to the group of $21.2m (plus finance and maintenance costs).

“Doing so would allow Stobart Group to exit its pre-existing parent company guarantees. 

“Stobart Group’s investment in Stobart Air and Propius was fully written down, as announced at the interim results on 4 November, 2020.

“The decision not to make Stobart Air its preferred supplier for a new commercial agreement does not alter the group’s intention to exit Stobart Air and Propius as soon as it is practicable. 

“Stobart Air will continue to provide a high-quality service to Aer Lingus’ customers for the remainder of the franchise.

“Stobart Group remains focused on maintaining tight cost control and cash burn is anticipated to remain at the same level as previously announced at the time of the Group’s interim results.

Warwick Brady, CEO of Stobart Group, said: “The group remains in positive discussions with a number of interested parties and continues to target an exit from Stobart Air before the end of the current financial year.”

“Whilst a disappointing decision by Aer Lingus, we believe that Stobart Air is a strategic and attractive asset for a potential buyer with number of options open to it in terms of continued operations beyond its current franchise agreement with Aer Lingus.

“It is well placed to build on eight years of reliable, customer focused connectivity between Ireland and the UK and utilise its European Air Operator Certificate to operate out of Ireland and seek further franchise or independent flying arrangements. 

“Stobart Air can also leverage its valuable slot portfolio, and its position as Europe’s largest and most experienced operator of ATR aircraft and enter negotiations with the new Aer Lingus franchisee given the anticipated interest in those assets.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.