Member Info for birddog816

Hi Gerry - I think we are actually both on the same page, but reading it differently. London Southend Airport Company Ltd is the operating company and owned by STOB. It loses a kings ransom every year. The argument for further investment is the potential / possibility / hope that it can reach the economies of scale to make it profitable. I would think that would mean 7m + passengers every year. In 2019 they achieved 2.1m. They would be lucky to achieve half that in 2021.

Then there is the value of the actual airport lease itself, as a going concern (operating as an airport, not the real estate). The only real value is potential profitability. It costs a fortune to run an airport and unless they can get the volumes in and moreover the right yield then they simply won't be able to not lose money. I cannot imagine for one minute that Ryan Air are paying a sustainable yield, and there is certainly no sign of any growth for some years to come. An asset that is actually a liability. If they down graded the airport, and focused on cargo and smaller operations then they might be able to make a modest operating profit given time. I'm guessing this isn't an option because the debt it has to service needs a huge amount cash and the only way to generate that cash is through profit or borrowing more. Neither of those seem possible.

Sorry to be a doom monger, but they're to big to be nimble and do not have the reserves to carry them through.

"I think these guys have more than Southend airport" They sure do - but anything that will generate the profit and cash they desperately need?
And yes of course they can take other airport business, the cargo they have with Amazon is good, but not sure that there's any scope to generate anywhere near the revenue they need with that business to run a whole airport, military? No real demand for this at Southend, maybe the odd visitor for training, and business jets - there are many airports much better positioned for these. The cold reality is that Southend Airport was losing a fortune before Covid. With the best ever numbers for passenger numbers, aircraft movements and revenue in the 19/20 FY yet they still lost tens of millions. Maybe there's something I can't see? I've taken my hit on this which is nice as I am no longer blinded by the spin and missed placed optimism. If it gets to single figures I will buy in again and see what happens.

Kong is pretty much on the nail here. No EasyJet from Tuesday onwards, with pretty much only Ryan Air, flying average of 2.5 flights a day in Sept, reducing to 1.5 a day from October. Will probably mean that ultimately Southend will close for 5 or 6 hours a day, everyday. No agenda, Just simple economics. There is no magic wand to wave. The airline and airport world is in a dark tunnel. It will show signs of recovery but not until the summer of 2021, even then it will be much supressed on the 2019 numbers. Until then, there is a long and dark winter to get through without the normal summer cash reserves to see them through. Focus on their results and numbers, rather than the narrative of the BOD. Sub 10p or takeover or administration, or all 3 by Christmas. I hope I'm wrong but can't see it.

Guessing this is bouncing in line with Tosca top up to over the controlling threshold?
I can see a similar scenario to Flybe here fairly soon. A Hobsons choice of either accepting 5p per share to take it private, or risk running out cash and go into administration.

Just read the RNS - the BIO business is positive news. The interesting line for me is :

"the ability to offer a cost efficient London base of operation to all airlines; "

Ability or willingness? - It's fairly clear that Southend Airport loses a lot of money YoY, with the goal of exponentially raising passenger numbers. Essentially buying market share. - That works sometimes where there is sector growth. There will be no sector growth for the airline and airport sector for probably 2-3 years minimum. Operating at a loss by offering cheap prices is surely going to add significantly to the cash burn. Cash they don't have. I cannot see that STOB will be able to trade out of this and will need significant cash injections to survive the next 6-12 months. TOSCA seem to be in charge of this I would imagine.

Hi Gerry - STOB have offloaded the rail division as it was loss making - seems sensible. They sold it for £1000 with a consideration of a further £2.9m depending on the outcome of a legacy contract. My point here being that there will be no cash injection, but at least they have filled a hole in the bucket. The Aviation division losses YoY are more than the rail I believe so it doesn't make a whole lot of sense to me to keep feeding the losses with no real prospect of any significant recovery or improvements in the next 3 or 4 years in the airline / airport sector. The energy division seems to be performing fairly well, so why not focus on that? Be interested in your thoughts.

Bandyman - are you a moderator for this site or an unemployed keyboard warrior? - Very difficult to tell. Gerry's posts are indeed a little longwinded sometimes, but also informative and well considered. Your posts are of little or no use as they don't ever offer any sort of informed opinion or facts. I have a vested interested in the STOB situation and your clutter on the message board really doesn't help. Talk about STOB on here please, that's what it's for.

Nothing short term I would think. It will take a year or so to get it operational. Amazon comes up the conversation surrounding Manston, which would make some sense as they would be able to get the bigger trans continental planes in there to link up with the short haul operation currently operating from Southend. Ultimately Amazon won't use Southend you'd think as it can't get the bigger planes in there. I can't see Manston threatening Southend beyond that though. It has no future as a passenger airport.

Now that TOSCA have 28% of the shares, (i.e. over 25%) is the appointment of Clive Condie to the board linked? It would make sense to have their man on the board to try and steer the ship to calmer waters.

Hi Gerry,

I guess I just see it as it is. For the MD of the airline to make such a statement and for that to get to the newspaper indicates to me that this is not a rosy picture. The Aer Lingus deal is Franchise, meaning that Stobart Air, and now by default, Stobart Group take the risk on passenger numbers and yield. They just use the Aer Lingus brand and ticketing system. There is no possibility of this airline making money anytime soon, or for that matter Southend Airport. Can the energy and rail STOB divisions counter balance this? If not, they will need more cash to feed the losses. Where will this come from? The hard numbers of the financial results say a lot more than the narrative from the bod. The main issue is that they cannot allow the airline to fail as is stated by the MD in the leaked memo and backed up by the STOB press releases, or the liabilities on the leases crystallises. There will be a short and sharp Indian summer for Southend Airport as some holiday traffic will operate, but this is for a couple of months only. As you have said many times Gerry, this is all about personal opinions. My prediction is that this will be south of 10p by Christmas and a very possible insolvency. Eventually STOB will run out of cash, it's just a matter of when. BD

https://www.pressreader.com/category/tag-540250998

interesting piece in the Irish Independent. STOB will need to continue to put cash into the airline to avoid it collapsing. If it does collapse, they will have to settle the liabilities on the aircraft leases, totalling over $100m.

Glad to see that the focus is back on point and not 2 diametrically opposed posters looking to score personal points.
The fact is that STOB is a basket case which ever angle you look at it. It's only going one way and that's down. Their survival before CV19 was based on a hugely optimistic growth strategy which in reality was never....reality. Stansted, Luton, City, Gatwick all have capacity to accept more flights now. The Southend business plan was essentially justified because everywhere else is full up. That is not the case now, and won't be for at least 3-4 years to come. EasyJet and RyanAir will consolidate their operations at Stansted and Gatwick now there is more capacity and a whole lot less demand. 60% of the catchment area is the sea at Southend. Stansted and Gatwick offer so much more let's face it. STOBs poor management, lack of respect for share holders and employees alike, almost fantasy business planning and selling far too cheap to the airlines has raised passenger numbers to around 35% of what they need to make it viable, and even then only if they can pursued the low cost airlines to pay proper rates. It simply isn't going to happen. This is without considering the liabilities or debt on the airline, Stobart Air, which are staggering. There might be some good returns on day trading from time to time but as a long term investment?

Gerry - If, and that's a big if, they raise £100m. How long will this last? They lost £150m in a good year! They are burning through cash at an alarming rate right now. That won't last them to Christmas.

Hi Gerry,
Of course the FLYB issue has a bearing on this, but lest we forget that it was on it's knees well before this. The COVID scenario doesn't really effect the financial results to FEB 20 which to me is the underlying issue. Passenger numbers wise it was their best year ever. It has never been better, or won't be better for a considerable time. I think this will be about as good as gets for them. The liabilities on the aircraft leases with Stobart Air are substantial. Being in the airline world for the next 3-4 years is going to be difficult to put it mildly.

There seems to be a notion that Southend Airport is the jewel in the crown. It isn't and certainly won't be in the next 5 years or more. A lot of the group losses come from Southend airport and the airline, Stobart Air. The YE Feb 2019 showed that the airport alone lost £38m. The more passengers they get, the more they lose which would indicate that they are simply selling cheap to win the airlines into Southend and get the footfall up. With ample slots now available at Gatwick, Stansted, Luton even Heathrow, all of which have better transport links, connectivity and catchment areas. London City also have spare capacity. Southend falls behind all of these aforementioned airports and it's upturn in passenger numbers in recent years has largely been due to lack of capacity else where. Southend Airport is over 60 years old, has underlying financial health issues and is now suffering the full effects of Covid-19. All this shares issue and further borrowing does is kick the can down the road and dilute the value to shareholders.

Question for people who know more than I do on these things. Are STOB vulnerable to a take over? At some point, Southend Airport at least would surely be an attractive proposition for this?

This is 2 relevant paragraphs from the STOB press release this morning concerning Flybe. Para 2 showing a BS right off of over £50m. The Airline and leasing company seems to be wholly owned by Connect. Stobart own a share of Connect, but with the money that's been pumped in to Flybe it seems that STOB now have nil value in this. The franchise with Lingus continues to operate, but all the Flybe franchise flights are cancelled, including all those at Southend.

"Stobart Group, Virgin Atlantic and Cyrus Capital formed the Connect Airways consortium which intervened in 2019 to prevent the collapse of Flybe and keep Europe's largest regional airline flying. Customers and staff have been at the front of the consortium's minds, and over the past 14 months Connect Airways has invested more than £135m to keep the airline flying for an extra year. This amount includes approximately £25m of the £30m committed in January 2020.

Stobart Group's initial investment was made up through the sale of Stobart Air and its aircraft leasing business, Propius. As a result, the non-cash balance sheet impact on Stobart Group is £43.3m and the additional £7m investment made in 2020. The value of both these investments will now be written down to £nil on its balance sheet. The Group has also foregone deferred interest that it would have benefitted from in future periods. Stobart Group had not expected to receive a contribution from Connect Airways until after FY 2020."

The Flybe situation will have a big effect. The Government seem to have cooled their interest in taking a stake. Not sure where that leaves Flybe and the new consortium. Connect Airways, Virgin Connect branding seems very quiet all of a sudden and they talk about Flybe instead.

The latest financials for Southend Airport (London Southend Airport Company Ltd) came out over the weekend on Co House. Not good. From revenues of £26m, the net loss was £38m. Something seriously wrong with this company.