Silverjet shares down 25% after announcement that Flyjet will stop flying
09.08.07
All-business class airline SilverJet announced yesterday that it is pulling out of the charter flights market this Autumn. News that it will not be renewing subsidiary Flyjet's leases on two Boeing 757s at the end of October caused the airline's shares to fall by almost 25%.
Silverjet said in a statement that it was withdrawing from the charter flight market 'owing to a challenging package holiday market.'Flyjet operated charter flights for a number of holiday companies from Newcastle Airport, but had experienced a number of reliability problems, causing long delays for passengers on three occasions recently.
The Luton Airport-based airline said that it did not intend to secure further aircraft when the leases on the two Boeing 757 aircraft operated by Flyjet expire on October 31. It said that the airline, which Silverjet acquired on October 2 last year, will cease operating charter flights from that date, when its contracts with a number of tour operators expire.
The company said that the acquisition of Flyjet enabled Silverjet to begin commercial flights to New York from its Luton base in January 2007, 9 months after it raised its initial capital and 6 months earlier than would otherwise have been possible, which the directors estimate brought forward net revenues of over of £3m.
The purchase also allowed Silverjet to lease a Boeing 767 significantly below current market rates, which the directors estimate will save £3m over the duration of the lease compared to current market lease rates, and to acquire its Air Operators Certificate, operating licence and a worldwide route licence, which allowed the new airline to avoid significant set up and operating costs, put at £10m over a 3 year period.
Silverjet said that it expected withdrawing from the charter business to cost approximately £300,000, in addition to the cost of the aircraft required on the scheduled return of the aircraft to the leasing company. In addition to the Boeing 767 aircraft, the subsidiary leased two Boeing 757s until November 2007 and January 2008 respectively.
The company added: 'The core business of Silverjet is its all business class service and the Directors see insufficient returns from continuing to offer a service in the charter market.'
Shares in the airline dropped by 24% - or 27.5p - to 83p yesterday and continuing to fall today, down another 3p. The shares were already down on news that the airline had delayed the introduction of its second daily return flight on its single route due to plane problems.
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