Member Info for birddog816

It seems the parking deal at Southend airport for the EasyJet planes is over. They have moved out all but 4, with them going this week.

I'm not sure about Carlisle. Maybe that could work regionally?
Totally agree about Amazon - they keep their cards very close to their chest. All I know is that they are bringing in a load of bigger planes into Europe and they won't be able to land these at either Carlisle or Southend. They have a hub at East Midlands but also want one in the south. Time will tell. Covid has been very good for Amazon!

Hi Gerry - indeed it should be viewed glass half full - they already had the cargo biz which is great. Re Amazon decision - Whilst they (Amazon) build the network infrastructure in Europe they needed a stop gap in the South East for some short haul routes. At the time (2019) everywhere else was up to quota. Ultimately they will need a much bigger facility that can accommodate the larger trans continental planes in order to have the effective global network and connectivity required. The UK is a huge market for Amazon and well beyond the scope of Southend airport beyond the short term.

BD

Not sure that's particularly good news for STOB TBH. They don't operate cargo aircraft. They have an airport that can handle limited amounts of cargo, which is almost up to max with the Amazon flights. There are plenty of airports in the UK that will be wanting this additional business that are better placed for it with the road connections required. East Midlands, Stansted, Birmingham, Heathrow etc....These can all take the larger transport aircraft as well. But they are operating to capacity nearly with the Amazon operation so you can't really ask for any more I guess.

For some context here, the FY end Feb19 saw revenue of £26.5m, with a GP of -£13.5m and a NP of -£38m. This based on 1.1m passengers. This is for Southend Airport only, not the rest of the aviation division.

Hi Gerry - Not sure it's for me to present their numbers to people. That's for the BOD to do. I have a very simple calculator on my desk. In all the years I've had it, it's never lied to me.
Economies of scale? - It seems it's diseconomy of scale in this case. The more passenger they get, the more they lose. Compare the STOB aviation division summer 19 figures to 2020.

You refer to capex as if it is a P&L item. That will be on the BS with only interest and depreciation finding it's way to the P&L.

Ultimately, I think where we would both agree is that STOB do not have the ability to earn their way of the hole they're in. It's their ability to borrow more that will buy them some time. It's whether anyone has the appetite to lend to them. My opinion only, E&OE and all that.

"The BOD has stated that Southend's break even figure is 2.5m passenger's going forward. Pretty sure I've posted hat to you before."

The accounts for Southend Airport to YE Feb 2020 will be out by a week Monday. This will include the whole of the summer 2019 period and with 2.1m passengers. If break even is 2.5m passengers, then it should be an easy calculation as to what the remaining 400k passengers need to bring in for it to be break even.

Totally agree Gerry - There is a logic to a simple transfer of aircraft and people. The elephant in the room is the liabilities on those leases. It would make no sense for Emerald to take that on when they don't need to. STOB have an out via the break clause, but that's a hefty amount cash required. And once they have no contract, and no aircraft to fly then there is no way of ever recovering the losses in Stobart Air. In the meantime they have to try and survive the next 2 years with it in place and the losses and cash burn that will create. It is possible that Emerald already have the infrastructure plan in the background ready to pounce if and when STOB go to the wall. The circling vulture.

Your suggestion relies heavily on a level decency and humanity that I'm not sure exists in this sector!

TF - I gave up a long time ago on recovering anything from this stock. Not heavily invested so it's more emotional investment now!

They just seem in such a pickle - Losing money consistently across the board, with or without covid, losing customers, not only due to Covid - Lingus isn't covid related surely? A lot of positive talk from the board, but the numbers speak for themselves. The cold facts are that they lost less money from the aviation division in the Covid ravaged summer of 2020 than they did in 2019 when they had record numbers of passengers at Southend. It's beyond my comprehension of business and especially my limited knowledge of corporate investment how this is possibly an investable business. The only investment / borrowings I can see they will get is from those already deep into the game trying to hoist it back somehow. No one wants to be the one to turn the lights out and commit to forever losing that capital. That might be the saving grace?

Emerald, with the contract with Lingus in their pocket, will be able to go to a myriad of lessors or even to ATR direct and get a very favourable deal, and maybe even mirrored to the Lingus terms.

I can't see why taking on the Stobart Air / Propius legacy debt and liabilities would make sense to Emerald? Just because they have the ATRs? - There are hundreds of these aircraft available on very favourable terms. The whole benefit of Emerald is that it is a clean slate in a buyers market. Why riddle it with someone else's legacy debt and liabilities. There is also the fact that Stobart still have the contractual obligations to fulfil through 21 and 22. If this generates profit then great, but in the current and predicted environment it's hard to see that this will be the case. So this will generate more losses and more cash burn along the way.

I'm aware of that, just wondered how EasyJet bringing flights back to Southend will help STOB?

@cleverinvester - How would that help STOB?

Ah Gerry - I feel like you've lured me in there on the Luton thing!
Well, to my knowledge, which is admittedly all gleaned from the internet, is that the local council has poured in lots of money. Might even be hundreds of millions. Luton is a well placed, well established airport and yet needs tax payers money? All it says to me is that these airports are not charging enough to the low cost carriers who use them. A bit like Southend. It's mad to subsidise the airlines at the expense of local tax payers or your shareholders. It's a vanity project. Who cares how many passengers they get when for every passenger that comes through, it costs money! T/O vanity, profit sanity.

On the liability on the airline it's simple. Stobart Air / Propius did a sale and lease back on some ATRs. They got over $60m in cash terms from that. 2018 I recall. In the meantime, the lease rates calculate to $15m pa. Over a lease term of 10 years this calculates to $150m. They're 3 years in now, so that's reduced to around $100m. Stobart Group are guarantor. To my understanding, that debt crystallises should the guarantee be called in. Therefore, in reality STOB cannot allow the airline to fail, or else they need to find the remaining lease rates. If they sell the airline, they need to offload the guarantee too. Even if they managed to do that, the leasing company would need to approve that transfer of liability to the buyer. All in all it's a total mess.

"To me it's all about the sale of Stobart Air in the short term." - Why would anyone buy an airline that lost money in the good times, has a huge liability north of $100m and has failed to secure it's only feasible source of income with Aer Lingus franchise which has now gone out to general tender instead of being extended?
Then there's Southend airport - There is talk of recovery, but recovery to what? They have lost less money during the pandemic than during their purple patch of 2019. Even if there is a quick recovery in the sector, it will take years for it have any sort of tangible effect on Southend. Heathrow, Gatwick, Stansted, Luton and City are all in front of Southend in that queue. The cargo buisness seems to be a life line, but does it have longevity and can it save STOB? It's the life support machine not the cure. Gerry likes to read what the BoD say and revels in the narrative. The fact is that the numbers don't support that narrative. I predicted sub 10p by Christmas back in the summer. I still think I'm right on that.

Even if there is an upturn in the airline industry, it won't happen any time soon as we have a long winter season ahead. With airlines pulling out of Southend altogether anyway, its' likely the main London Airports will take up any extra flights before they consider Southend. I don't understand why STOB don't focus on the energy division and bin off the Aviation. The airport and airline sector is years away from recovering back to 2019 levels. Even then, the 2019 financials for STOB were dire anyway so why pursue something with that level of loss and cash burn that will inevitably pull the whole thing down.

Do you think Stobart would want to or be able to?

https://www.ch-aviation.com/portal/news/96163-sale-of-irelands-stobart-air-in-jeopardy

Seems the liabilities are a major stumbling block, coupled with the uncertainty about the Aer Lingus franchise deal.

With average load of under 10 there's no surprise there.
Read this too : https://www.echo-news.co.uk/news/18709445.plans-southend-airport-hotel-refused-council/?fbclid=IwAR0KRQkYUk94_GnCNOyXplydFZBWw8OQ_i8Hnbw20GwfqFVCXYawZ0UcHrg

Interesting comments from the council about previous behaviour of the airport. Seems this has gone some way to sway the decision.

TF - I agree with you there. They have far too much skin in the game. It's about stemming the losses and cash drain. Some sort of moth balling until the market is strong enough to kick start it again.