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  • Cost of developing Flybe routes pushes Stobart Aviation to loss

Cost of developing Flybe routes pushes Stobart Aviation to loss

Costs of £18.1 million ($23.3 million) incurred in developing routes under a Flybe franchise deal drove Stobart Group's aviation division to a £2.7 million EBITDA loss in the six months ended 31 August.

This compares with a £3.6 million profit in the same period of 2017.

If the Flybe-related effects are stripped out, underlying aviation EBITDA was up 15% to £15.7 million. Total aviation revenue rose 16% at £103 million.

In May 2017, Stobart Air began operating for UK regional carrier Flybe from London Southend airport, which is owned by Stobart Group. However, the franchise operation is "being withdrawn following the agreements with EasyJet and Ryanair to expand their operations at [Southend]", notes the group, which earlier this year had a takeover offer rejected by Flybe.

Of its expenditure on development of the Flybe routes, Stobart observes: "Demonstrating route viability and building customer awareness was central to securing a milestone agreement with Ryanair that will allow us to accelerate the growth of the airport."

Flight Fleets Analyzer shows that Stobart Air operates Embraer 195 jets and ATR 72 turboprops. Stobart says it will end jet operations for Flybe by the end of the current financial year – which runs to 28 February – and turboprop flights by the end of the next one.

The group meanwhile foresees growth of its franchise partnership with IAG-owned Irish flag carrier Aer Lingus. "Stobart Air will also leverage the value of its aircraft by securing additional commercial relationships with other airlines," it adds.

Southend airport's passenger numbers rose 37% to 839,000 in the first half, says Stobart, noting that EBITDA per passenger rose from £1.74 to £3.26.

The group expects that EasyJet passenger numbers from Southend will exceed one million in 2018 following the UK low-cost carrier's decision to base a fourth aircraft there, and that the agreement with Ryanair – which plans to station three Boeing 737s at the airport – will bring 1 million additional annual passengers from summer 2019.

Factoring in other agreements with Air Malta and Slovenian carrier Adria Airways, Stobart is estimating Southend's 2019 passenger numbers at 2.5 million. It expects this figure to double by 2022.

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