16th Nov 2020 10:10
(Alliance News) - Stobart Group Ltd on Monday noted Aer Lingus's decision not to make Stobart its preferred supplier for a new commercial agreement that would have begun January 2023.
Shares in Guernsey-headquartered aviation and energy infrastructure firm Stobart Group were up 2.8% at 25.69 pence in London in morning trading.
Aer Lingus is part of International Consolidated Airlines Group SA, which also owns British Airways and Iberia. Stobart Air is to continue operating the Aer Lingus franchise until 2023.
If Stobart Air is not awarded a new commercial agreement, then Stobart Group can opt to exercise its right to an early break clause for a lease agreement of eight ATR aircraft in April 2023, incurring a cost of USD21.2 million as well as finance and maintenance costs. This would allow it to exit its pre-existing parent company guarantees.
As announced in its interim results on November 4, Stobart Group fully wrote down its investment in Stobart Air and Propius. Aer Lingus's decision not to make Stobart Air its preferred supplier for the new agreement does not alter Stobart Group's plan to exit both Propius and Stobart Air "as soon as it is practicable".
"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," the company said.
Stobart Group Chief Executive Warwick Brady 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."
Brady added that: "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."
By Anna Farley; [email protected]
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