I think it’s fair to say that Mike Stoddart was not the highest-profile analyst in the UK before Monday this week, and in aviation nobody knew him at all. But they do now. Mr Stoddart, of Daniel Stewart Securities, is the man who this week knocked more than a quarter of the value off premium-class transatlantic carrier Silverjet with a single devastating note to investors. He says Silverjet will inevitably fail, which has the virtue of clarity at least.Silverjet are not amused. They say Stoddart’s got his figures wrong and doesn’t know what he’s talking about. But the fact is that four days later they’ve only managed to claw back a small fraction of their market value.
Chart: Digital Look
This, remember, comes only a few weeks after the collapse of Silverjet rival Maxjet, so spooking traders is not so difficult. Who’s the winner then? Well, in the circumstances I think it’s a draw (tie) for now, with much still to play for.
Consider, Stoddart has devoted 32 pages to explaining why stock in this company is literally worthless. The market has taken a rational view and said “maybe, maybe not” – and the price reflects that.
I haven’t read the report myself, but my feeling is that Silverjet’s model is probably as good as it gets. Nevertheless, they’re clearly in a challenging game. The issue with Maxjet was that they didn’t have the courage of their own convictions and ended up with a product that was not really classy enough, hoping that they could win on pricing. That was never going to work – the whole point is that this market is about offering a product at or around business-level at a vastly lower price-point. The odd couple of hundred bucks is neither here nor there.
Silverjet is well-liked by the people who use it. In the company I work for most transatlantic travellers can fly premium-economy, but Silverjet’s pricing is sufficiently close that they’re permitted to use it if they want to. And many of them do.
Times are getting harder now of course. Some people who currently fly Silverjet may decide they can’t afford to anymore, perhaps not even afford to fly so much at all. But some people who currently shell out for mainline business-class may decide that Silverjet is just the ticket.
If Stoddart turns out to be wrong then I’m sure he’ll survive and so will Silverjet of course; if he’s right then Silverjet won’t and he’ll have a nice line on his CV (resume).