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Silverjet challenges analyst's bleak outlook

UK all-business carrier Silverjet has defended itself in the light of a scathing analyst’s research note, which branded it likely to fail and advised investors to sell at any price.

The research note, which was published by investment bank Daniel Stewart & Co, gave Silverjet a target price of nil per share and advised investors to sell as soon as possible. But Silverjet claims that the research is flawed and adds that it is in a “strong financial position”, having just raised £22 million ($43.4 million) in capital.

Daniel Stewart & Co analyst Mike Stoddart, who wrote the report, tells ATI: “We initiated a target price of £0.00 because we think the business model doesn’t add up. We feel that their fares can’t cover their costs, which are too high.”

Silverjet, which operates Boeing 767s from London Luton to New York Newark and Dubai, has struck back at the research, claiming that it contains “numerous material mistakes and inaccuracies”.

The airline says that its current cost per rotation stands at £75,000, far lower than the £135,000 quoted in Stoddart’s research.

But Stoddart argues that his cost per rotation calculations - although not current - are a “matter of fact”, as they are based on the airline’s financial results for the six months-ended 30 September. He adds that the £75,000 does not include administrative overheads, which impact the company’s overall profitability.

Silverjet also claims the assumptions underlying Stoddart’s maintenance liability and cash generative calculations were flawed.

It says: “The directors remain confident that Silverjet will achieve its first month of profit before tax in the current financial year ending 31 March 2008. Cash flow will be broadly neutral over the remainder of its current financial year ending 31 March 2008 and the business is expected to be cash generative thereafter.

“The business continues to trade strongly with 5000 bookings being made last week and 20% of customers are now repeat bookings. Silverjet remains very confident that it will continue to deliver on its strategy and revolutionise the way passengers fly long-haul business profitably.”

Stoddart says that the booking spike has been generated by Silverjet’s sale, with seats being sold for as little as £500 one way. “Although it sounds good, it is just a drop in the ocean,” he says.

He adds that Easter falls early in 2008, which is likely to swell the airline’s March performance, and says: “The guidance that they have given on costs is too vague to be of use to anybody.”

The wrangling follows the collapse of US all-premium carrier Maxjet, which entered Chapter 11 bankruptcy protection at the end of last year after failing to finalise a new round of financing.

Source:'s sister premium new site Air Transport Intelligence news

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