After warning at the end of May that the proposed sale of Stobart Air and Carlisle Lake District Airport (CLDA) to Isle of Man-based company Ettyl was in doubt as the funding package to support the airline was no longer available, Esken has now confirmed that the transaction has been cancelled and the company has ceased trading. (Reports also surfaced recently that Ettyl had been forced to report certain paperwork discrepancies associated with the planned financing to the Isle of Man police).
On June 12, Stobart Air said the funding for the deal “is no longer in place and the new owner is now unable to conclude the transaction”.
“Given the continued impact of the pandemic which has virtually halted air travel since March 2020 and in the absence of any alternative purchasers or sources of funding, the Board of Stobart Air must take the necessary, unavoidable and difficult decision to seek to appoint a liquidator,” the company said.
Esken has undertaken certain contingency planning measures and has agreed that it will continue to fund the lease obligations on the eight ATR aircraft through to termination of the leases in April 2023 under the terms of its pre-existing guarantee. Esken confirms that it will take immediate steps to seek sublease arrangements for the aircraft with alternative operators to mitigate the impact on the Group.
Esken has also terminated its franchise agreement with Aer Lingus but it remains responsible for certain obligations under agreement, which were the subject of a pre-existing guarantee and have become payable following the termination. These obligations total £82 million due between 2022-24.
Esken says that although it had taken all steps to minimise the cash requirements of Stobart Air while seeking a buyer, the Covid pandemic that resulted in no flying since April 2020 and the decision of Aer Lingues to award the franchise to another party after December 2022 “significantly hampered the exhaustive steps taken to secure a future for the business and its staff”.
“It is disappointing for all stakeholders that we have been unable to conclude the sale of Stobart Air as a going concern despite the tireless efforts of my executive colleagues, the management team of the Airline and the team of advisors who have supported them,” said David Shearer, Executive Chairman of Esken. “I am acutely aware of the impact this will have on the staff, customers and the businesses associated with the airline but the continuing impact of the pandemic in terms of lockdown and limited travel has prevented us from achieving a better outcome.”
Esken plans to retain the ownership of CLDA rather than it being sold for £15 million but states that it will “actively explore strategic options for the use of this asset in discussion with stakeholders including potential alternative commercial opportunities for the airport”.
Esken also owns London Southend Airport (LSA), which it describes as a “prime asset” despite the impact of the pandemic on the aviation industry, and confirms that it plans to “continue to invest in the infrastructure of the airport in step with passenger demand recovery allowing LSA to meet the needs of airline partners for an efficient cost effective London airport”. Indeed, Esken confirms that it is in the final stages of agreeing the documentation for a strategic funding transaction into LSA that would release significant liquidity into the Group while underpinning the funding requirement of the Airport in the medium term.
“Our focus now is to secure the position for the rest of the Group and ensure that we have the necessary resources to support the recovery plans for our two core businesses as we anticipate the return to normal activity levels in a post COVID world,” said Shearer. “The discussions on future financing including the strategic partnership for LSA are continuing and I fully expect to bring these to a positive conclusion when we announce our year end results by the end of June.”