Stobart Air was only saved to prevent collapse of Stobart Group, according to airline’s MD
Aer Lingus Regional carrier is fully reliant on Stobart Group
DUBLIN-BASED Stobart Air, which operates the Aer Lingus Regional service, was only saved from receivership by the UK’s Stobart Group to prevent the group itself from collapsing, the managing director of the Irish airline has confirmed.
In an internal Stobart Air memo seen by the Irish Independent which details minutes of a crisis meeting held two weeks ago, managing director Andy Jolly also said that Stobart Group has no intention of owning Stobart Air in the long term and won’t bankroll an expansion the carrier had planned at Belfast and the Isle of Man.
The current contract Stobart Air has with Aer Lingus expires at the end of 2022.
“No commercial arrangement that we can find that allows us to access funds to permit us to continue to trade so we are totally dependent on Stobart Group for that funding,” the minutes report Mr Jolly has having told the meeting on June 23.
“We don’t have any Aer Lingus franchise beyond December 2022 and Stobart Group have made it clear that they have no long-term intention of retaining us,” the minutes recount Mr Jolly has having said.
“They [Stobart Group] only prevented us going into receivership as a consequence of their self-interests, as they would have gone out of business,” they add Mr Jolly as having said.
Both Stobart Air and the Stobart Group declined to comment yesterday on what was said by Mr Jolly during the meeting.
Like other airlines, Stobart Air has found itself in a dire situation due to the Covid pandemic. But its troubled position has enveloped the Stobart Group due to as much as $100m (€88m) in liabilities that the group has connected to Stobart Air and an aircraft leasing arm called Propius. Those liabilities include about $25m related to maintenance reserves for eight aircraft that are part of the Stobart Air fleet.
The stock market-listed Stobart Group agreed in April to re-acquire a 49pc stake in Stobart Air and Propius from EY, the administrator of the Connect Airways vehicle of which Stobart Air and Propius were a part.
That gave Stobart Group a more than 78pc economic interest in Stobart Air. The Stobart Group owned 30pc of Connect, which used to also own Flybe. That carrier collapsed in February.
Stobart Air is planning to axe more than 150 of its 570 staff.
“If nothing else changes we are only going to deliver Dublin and Cork [services] on a reduced operation, the meeting’s minutes report Mr Jolly as saying. He added that Stobart Group is “risk averse” and does not want to take “unwarranted risk in further investment in this organisation” to exercise any expansion plans.
“We need to find a way of reducing our overhead and 50pc is staff costs,” the minutes recount Mr Jolly as having said. He added that “there is going to be casualties”.
Stobart Group raised £100m (€110m) in equity from investors last month to shore up its balance sheet. It issued the shares at 40p, representing a 42pc discount. The shares were trading at 33p yesterday.
Some of those funds are destined for Stobart Air, said Stobart Group, which also owns London Southend Airport.