Ryanair to close its London Southend Airport operations in blow for Esken

Esken has been dealt a blow with news that Ryanair will close its operations at London Southend Airport (LSA) from the start of the winter season this year.

The Carlisle-based aviation and energy group, previously known as Stobart Group, said the Dublin-based carrier informed it of its intentions, which are expected to come into effect from November 1, 2021.

Ryanair signed a five-year agreement to base three aircraft at London Southend Airport in 2018 and commenced operations on April 1,2019.

The airline has had two aircraft in operation since 2020, following a reduction driven by the coronavirus pandemic.

However, Ryanair’s performance at London Southend Airport has been further affected by the COVID-19 pandemic and has now resulted in this decision.

Esken said it is currently in the process of reviewing the impact of such decision on its forecasts.

However, it said the financial impact of Ryanair’s base closure will be mitigated by a reduction in costs directly associated with serving Ryanair’s base and the low level of passengers expected during the winter season.

Fellow budget carrier, easyJet, pulled out of LSA last year.

Last month Esken announced it had signed a deal for a £125m investment from a special purpose vehicle controlled by Carlyle Global Infrastructure Opportunity Fund to invest in LSA.

The senior loan facility is convertible into 30% of the shares in airport company on approval.

Esken said it also intends to raise a further £60m through a new £20m working capital facility and a £40m equity raise.

The aviation and travel sector has been badly affected by the impact of the pandemic, which resulted in most airline fleets being grounded and airports all but closed.

Esken executive chairman, David Shearer, said today: “The terms of the deal which had been entered into with Ryanair in 2018 were based on a significantly different set of market and economic parameters to the present day. We are, therefore, commercially agnostic to this decision and will look to build sustainable and profitable passenger growth for LSA with a range of other carriers as demand recovers into a post pandemic world.”

He added: “LSA has a catchment area of circa eight million people resident within one hour travelling time from the airport, a regular direct train connection to London Liverpool Street station, a cost efficient base of operation for airlines and an enhanced safe passenger experience for post COVID-19 travel.

“The fundamental commercial rationale for LSA remains strong and our partnership announced recently with Carlyle will allow us to capitalise on that opportunity as passenger demand recovers.”

Ryanair currently has two based planes operating out of LSA but schedules, load factors and yields have been affected significantly by the uncertain market in aviation resulting from the COVID-19 pandemic. Following a review of its network Ryanair has decided to redeploy these aircraft to its other bases to improve its own overall network efficiency with effect from the start of the winter flying season.

Esken said the impact on both EBITDA and cash headroom in FY22 will be negligible in view of the expectation of limited flying in the winter season.

In relation to FY23, it said management has time to implement mitigating actions which will include cost savings and deferral of discretionary capital expenditure and attracting new carriers into LSA to operate the routes vacated by Ryanair.

The impact on EBITDA and cash headroom in FY23 if no such actions were taken is expected to be around £1.4m against the Reasonable Worst Case Scenario as set out in Prospectus and Circular issued on July 28, 2021. The ring-fenced funding facility for the airport has adequate headroom to cover any such potential impact.

Esken said it remains focused on targeting airlines for the recovery of flying in summer 22 when demand is expected to show a recovery post COVID-19.

The group is in active dialogue with a range of low cost and flagship carriers where the previously proven route profitability, the airport’s efficient operating cost base and the safe passenger experience is likely to prove attractive as demand recovers.

It said the announcement by Ryanair does not have any impact on the investment into LSA announced with Carlyle Global Infrastructure Fund or the new banking facilities.

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