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Southend-2

Old 3rd Jun 2020, 13:00
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Originally Posted by Red Four
6 LDY rotations, last from SEN on 9th April, so average 3.9 per flight, not that it is of consequence.
Fair enough, though the SEN data showed 14 scheduled domestic movements.

The return of LDY got pushed back a couple of months as Wizz a couple of weeks both of which only a week or two ago had first services on 1st/2nd I think. LDY now 1/8 and Wizz from 16/6. Is there a list of other anticipated start dates?
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Old 5th Jun 2020, 06:02
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https://www.expressandstar.com/news/...se-extra-120m/

Loses double to £170m as the owners seek a cash injection of £120m

Bosses said the main focus will be on London Southend Airport to “specifically design and implement an improved passenger experience for post-Covid 19 travel, making use of significant unutilised space and technology to enhance passenger confidence, while providing a cost-efficient base of operation to airlines”.
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Old 5th Jun 2020, 09:02
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https://polaris.brighterir.com/publi...r73eovx/export

Results up to 29/02 , copied from Carlisle thread( apologies)

Interesting read but I don’t think I would invest!

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Old 5th Jun 2020, 09:38
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Originally Posted by Falcon666
https://polaris.brighterir.com/publi...r73eovx/export

Results up to 29/02 , copied from Carlisle thread( apologies)

Interesting read but I don’t think I would invest!
As usual, the accounts are clear as mud! However it seems that the Group have raised an additional £80m from shareholders this morning which will be used to pay back the overdraft. At which point a new overdraft of £40m will be offered on more expensive terms. They had to do this as a) they had run out of enough cash to see them through the year and b) the provider of the overdraft (or Revolving Credit Facility as it is known) has a full legal charge over the airport and could in theory take control of the airport due to the "going concern" issues.

I suspect the shareholders are not happy but faced with a "pay up or lose it all" scenario they took the least painful option. I think the accounts show that even with this new cash injection there is still the possibility that the company might run out of cash prior to the next year end.

Getting the airport profitable before the cash run out was always the dilemma facing the owners. Carlisle Airport will now be sacrificed to try and keep Southend alive. Let's hope they succeed but I have to admit the future looks very gloomy.
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Old 5th Jun 2020, 10:10
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Jota Aviation

Bae146-300 freighter G-JOTD has flown an air test from SEN this morning after a couple of years parked up following its purchase by Jota. This will join G-JOTE and G-JOTF on the freighter fleet.
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Old 5th Jun 2020, 16:44
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Looks like they are selling all property in the portfolio I.e. port of Weston in Runcorn, Carlisle airport and the rail and energy businesses so that they can fully focus on SEN.
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Old 5th Jun 2020, 23:35
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Eggs and basket comes to mind. Stobart will not be in control of the situation at SEN. It’s the airlines that will dictate expansion or contraction. Seeing that the airport is a minor base for Easyjet and Ryanair and with Wizz just dipping their toes into the water at Southend the airport will be very vulnerable in the short term so could Stobart run out of money?

Stobart’s plans for Southend was based on the fact that there was very little capacity left at other London Airports so Southend’s geography could be ignored. That won’t be the case in the short to medium term. Will it be the case that another company will ultimately benefit from Stobart’s vision and cash?
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Old 6th Jun 2020, 08:59
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Originally Posted by LTNman
Eggs and basket comes to mind. Stobart will not be in control of the situation at SEN. It’s the airlines that will dictate expansion or contraction. Seeing that the airport is a minor base for Easyjet and Ryanair and with Wizz just dipping their toes into the water at Southend the airport will be very vulnerable in the short term so could Stobart run out of money?

Stobart’s plans for Southend was based on the fact that there was very little capacity left at other London Airports so Southend’s geography could be ignored. That won’t be the case in the short to medium term. Will it be the case that another company will ultimately benefit from Stobart’s vision and cash?
Sadly, the eggs will end up in just the SEN basket just as soon as the intention to dispose of the energy business is accomplished. The owner of the airport has been squeezed by circumstances that many will see as having been outside of its control.

The first of these was the eye-wateringly high costs of attracting airlines to the airport. The owners obviously subscribed to the "build it and they will come" business model based upon the London credentials of SEN. Whilst many saw the freebie thrown at EZY as justifiable, as this proved the potential of the proposition to other carriers, the route development costs kept on mounting, year on year. The whole idea underpinning SEN was that it was to provide runway capacity in a squeezed geographical marketplace with huge demand. To keep on paying huge premiums to airlines to operate flights from the airport has seriously dented the cashflow of the group.

The second was the Connect fiasco. I thought at the time it was a clever move as owning an airport and then running your own flights from your airport to push up pax numbers doesn't bode well. Dumping Stobart Air and all of the liabilities that came with it into Connect was a great move. But then having to take back all of those liabilities and pay for the pleasure could not have been part of the business forecasting at SEN HQ.

Whereas the airport needed time to grow pax numbers to a level where EBITDA per pax got somewhere near £10, the cash drain accelerated throughout 2018/19. Last year it was clear that the money tap was about to run dry. PAX numbers grew throughout the year but critically the profit on each passenger failed to get anywhere near the magic £10. The final straw was having to take Stobart Air back in house. The credit facility was maxed out and the bank was most probably pointing out to the owner's that they had the airport as full security to cover the overdraft. Without the owners putting more money in, the bank was sure to foreclose. It that had happened I am sure that the bank and the council would have been looking at housing on a site with excellent rail links into London.

All of the above happened before COVID-19. The latest accounts run to the end of February 2020. Connect was already a busted flush by that time, with COVID-19 the excellent face-saving excuse that Virgin needed to walk away.

The owners now have to make a go of the airport with reduced cash to spend. It is unlikely they can throw more route development funds at the problem so they will have to consolidate what they have and grow organically. There are hints in the latest communiques that they are going to target the very low cost sector and I'm guessing this will be Whizz and Eastern Europe. Whatever they do it will have to make an immediate impact. They have renegotiated a smaller credit facility but this will only provide funding for one more year at a push. If any more of the deferred liabilities get called in (interestingly the Group stood as guarantor to Eddie Stobart on a very large property lease) they will fail as a company in the coming year.

SEN is not unique in that no airport needs a problem like COVID-19 right now, but with shareholders having just rescued the company from the claws of the bank, getting pax numbers back and above previous levels within 12 months is crucial to the company's survival. How they do this with social distancing and travel quarantines in place is hard to fathom.

Whereas LTNman believes that if Stobart fail, another airport operator will jump in and reap the benefits of Stobart's investment over the years, I am not so sure. If Stobart fail, the bank owns the airport. It will be up to them to decide upon the fate of the site.
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Old 6th Jun 2020, 09:27
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Do the council and voters want the land to remain as an airport, and how much will they insist on this ? Would central Govt 'call in' an application for change of use, and would such a change of use be allowed by Westminster ?
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Old 6th Jun 2020, 09:56
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Originally Posted by davidjohnson6
Do the council and voters want the land to remain as an airport, and how much will they insist on this ? Would central Govt 'call in' an application for change of use, and would such a change of use be allowed by Westminster ?
IF, and it's a big if, the current owners fail, and the ownership of the lease was put up for sale, the local authority would first have to increase the term of the lease. It is commercially unviable to enter into a lease of less than 100 years and most investors would want 125 years minimum.

When deciding on whether to increase the term of the lease the local authority will have the opportunity to reassess the benefit of the airport to the local community. A new housing estate with a dedicated train station is what town planners dream of at night.

Is SEN currently seen as priority national infrastructure? Does government care about the Essex outpost and what goes on there? Not sure either way.

There is a long way to go yet, and I'm betting on a SEN revival, but if the future is dependent on a bank board of directors, anything is possible.
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Old 6th Jun 2020, 10:19
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asdf1234

I agree with much of what you say, but you speak almost as if Stobart are the owners of the airport site whereas they hold only a long leasehold tenure. The bank might foreclose on Stobart, although I think you perhaps overstate the likelihood of that, but the lease would revert to Southend Council as freeholder I presume. I'm sure they would explore every avenue to keep the site as an aviation asset for the town in view of its employment value. All in all a little early for that sort of serious speculation I would suggest; let's leave that for 12 months down the line perhaps.

I cannot recall the time left to run on the lease but I think it may still be greater than 125 years.
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Old 6th Jun 2020, 11:27
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Originally Posted by Expressflight
asdf1234

I agree with much of what you say, but you speak almost as if Stobart are the owners of the airport site whereas they hold only a long leasehold tenure. The bank might foreclose on Stobart, although I think you perhaps overstate the likelihood of that, but the lease would revert to Southend Council as freeholder I presume. I'm sure they would explore every avenue to keep the site as an aviation asset for the town in view of its employment value. All in all a little early for that sort of serious speculation I would suggest; let's leave that for 12 months down the line perhaps.

I cannot recall the time left to run on the lease but I think it may still be greater than 125 years.
A quick footnote to the lease question. Original was granted in 1994 for 125 years. It now has 99 years to run. The lease does not revert to the freeholder upon Stobart's demise otherwise it would be worthless security.

Agree with you on the rest, time will tell.
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Old 6th Jun 2020, 11:50
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Still greater than Luton which is now down to just 11 years.

The Luton lease means the airport operator has to pay a per passenger fee to a limited company the council set up. With Southend I don’t think Stobart has this arrangement so pays nothing apart from a possible lease fee.

With Luton, the short lease, which was only 30 years, has been sold on so I would have though this is an asset Stobart could sell. A bit like slots at Heathrow. I of course stand to be corrected by the locals here.
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Old 6th Jun 2020, 11:57
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My personal view, with no axe to grind, is that in the long term SEN will do well but, as is so often the case, the “first mover”, in this case Stobbart, will lose out. Look at LCY - now (excluding current crisis) a great success but it wasn’t for the original operator and airlines.
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Old 6th Jun 2020, 12:24
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https://www.independent.ie/business/...QAVfnyLeSfnHCw
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Old 6th Jun 2020, 12:54
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Originally Posted by LTNman
Still greater than Luton which is now down to just 11 years.

The Luton lease means the airport operator has to pay a per passenger fee to a limited company the council set up. With Southend I don’t think Stobart has this arrangement so pays nothing apart from a possible lease fee.

With Luton, the short lease, which was only 30 years, has been sold on so I would have though this is an asset Stobart could sell. A bit like slots at Heathrow. I of course stand to be corrected by the locals here.
They certainly could sell the lease but they have a problem. Throughout their ownership of the airport they have consistently made a loss on operating it. Who would want to buy a loss making operation?
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Old 6th Jun 2020, 14:14
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[QUOTE=asdf1234;10803760) The lease does not revert to the freeholder upon Stobart's demise otherwise it would be worthless security[/QUOTE]

Normally a commercial lease cannot be used as security against bank finance as it will have been entered into without a premium at an open market rental and thus has no intrinsic value. If a premium had been paid to obtain the lease from the freeholder it could have some value as security.
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Old 6th Jun 2020, 17:20
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Originally Posted by Expressflight
Normally a commercial lease cannot be used as security against bank finance as it will have been entered into without a premium at an open market rental and thus has no intrinsic value. If a premium had been paid to obtain the lease from the freeholder it could have some value as security.
Think through it logically. Would a bank take security over buildings only, knowing that if the company they were lending to went bust, the land on which the buildings were built, reverted to a third party?

The answer is no. I've seen similar deals on UK airport land/property subject to long term underlying leases.
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Old 6th Jun 2020, 17:24
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Originally Posted by asdf1234
Think through it logically. Would a bank take security over buildings only, knowing that if the company they were lending to went bust, the land on which the buildings were built, reverted to a third party? I've seen similar deals on UK airport land/property subject to long term underlying leases.
Perhaps you should check then to see if such a "long term underlying lease" exists. I'm not doubting your expertise, just your assumptions.
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Old 6th Jun 2020, 17:33
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On other matters, scrutiny of the Annual Report shows that they plan to operate separate Departures and Arrivals Terminals, the latter shown as being physically remote from the existing Terminal, which is to be 'extended' to provide greater Departures space. I think maybe that means extending Departures into the existing Arrivals space. The Annual Report says of this plan "We can design and deliver a redesigned airport by Summer 2021". That sounds quite ambitious. Funding for this will come from part of the Capital Raise money.
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