UK regional carrier Stobart Air is to be sold to Isle of Man-based investor Ettyl, which is also acquiring Carlisle Lake District airport in the north of the UK.
Stobart Air, which operates regional services under a franchise agreement with Irish carrier Aer Lingus, and the airport are divested by airline and energy company Esken – formerly Stobart Group before a name change in February.
Ettyl says he intends to retain all staff currently employed by the airline and the airport, and intends to detail development plans over the next few months.
“[We see] significant opportunities for increased regional connectivity as economies recover from the impacts of the pandemic and return to stability in the UK and Ireland, âsaid Jason Scales, Managing Director of Ettyl.
Ettyl recovers Esken’s shares in Stobart Air for Â£ 2 and the balance sheet cash value on completion, plus Â£ 7.5million if certain trigger events occur before July 1, 2024.
The details of the transaction between the airline, the airport and the aircraft rental company Propius, are complex.
Esken expects the deal to go through in early May, subject to the bank’s consent. The company has long had plans to sell Stobart Air after buying stakes in the carrier and Propius from the directors of Connect Airways.
Connect Airways acquired Stobart Air in early 2019, as part of a plan to combine its operations with regional operator Flybe.
But Flybe collapsed in March 2020 and Esken – then Stobart Group – decided to buy back its Stobart Air in order to take control of the legacy guarantees and obligations before the sale to Connect.
âThe buyout was a necessary action at the time in order to mitigate the potential impact of the call for these guarantees,â says Esken, adding that it enabled refinancing of the company to reduce the effects of the pandemic. .
Aer Lingus opted last year not to renew the Stobart Air franchise from 2023, instead selecting another preferred bidder, which could delay Esken’s plans to find a new owner for the regional carrier.
Esken acknowledges that this – along with the pandemic – has led to a “protracted process” to sell the airline.
As part of the sale process, Esken will take over full ownership of Propius for the nominal sum of Â£ 1 and will retain responsibility for ongoing rental obligations until April 2023. Propius’s responsibilities under its rental agreements planes will be “mitigated and subsidized” by Stobart Air, says Esken, with Propius entering into a sublease agreement with the carrier until then.
Ettyl will acquire Esken’s entire stake in the owner of Carlisle Airport for Â£ 15million in cash plus the value of any on-balance sheet cash.
Esken claims that the sale of the airline and the airport is “cross-conditional,” with the net effect of the two transactions being that the proceeds from the sale of the airport will be offset by obligations relating to debts and payments owed to them. Ettyl regarding the sale of Stobart Air.
While the sale of Stobart Air will result in a loss of around Â£ 8million, the airport divestiture will generate a profit of over Â£ 10million.
Esken executive chairman David Shearer said the sale process had been “difficult”, especially given the impact of the pandemic.
âStobart Air remains a vital part of the connectivity between Ireland and the UK and I am pleased that we have been successful in securing the future of this company and its 480 employees under the management of a new owner with the ‘ambition to develop its network of roads,’ he said. “The sale of the airline presents a significantly better financial result than that resulting from a closure.”