Stobart Air blow as Aer Lingus signals end to commercial agreement

Stobart Group, the Carlisle-based aviation and energy infrastructure group, has been notified by Irish flag carrier Aer Lingus, that its Stobart Air operation is no longer the preferred supplier for a new commercial agreement.

The new deal would have started in January 2023 and Stobart Air will continue to operate the Aer Lingus franchise until that time.

Should Stobart Air not be awarded a new commercial agreement, Stobart Group can exercise its right to an early break clause for the lease agreement of eight ATR aircraft in April 2023 at a cost to the group of $21.2m, plus finance and maintenance costs.

Doing so would allow Stobart Group to exit its pre-existing parent company guarantees.

Stobart Group’s investment in Stobart Air and Propius was fully written down, as announced at its interim results earlier this month.

The decision not to make Stobart Air its preferred supplier for a new commercial agreement does not alter the group’s intention to exit Stobart Air and Propius as soon as it is practicable.

Stobart Group said it 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 interim results.

Warwick Brady, Stobart Group chief executive, 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.”

He added: “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.”