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Stobart gives Ryanair the brush-off in the battle of the airlines

As the logistics firm ramps up its aviation arm, could we soon see Eddie Stobart Airlines?

Eddie Stobart lorry
Stobart Group is behind the iconic Eddie Stobart lorries

Stobart Group (LON:STOB)  passed on a partnership with Ryanair to boost passenger numbers at its flagship London Southend Airport, the company told Proactive Investors.

"We could pay Ryanair a load of money right now, but we don’t want to do that. In the long term, we don’t think that’s sustainable," said Ben Whawell, chief financial officer.

The logistics firm behind the iconic Eddie Stobart lorries, soared back into the black with its final results statement and promised "rapid growth" for its London Southend Airport.

Stobart wants its Southend Airport to compete with the big London airports and to be the alternative to the likes of Gatwick, Heathrow and Stansted for travellers to the capital, chief executive Andrew Tinkler told Proactive Investors.

The aviation arm was a major growth driver for the group and the board is already exploring sustainable long term contracts with airlines to drive passenger numbers.

"There's a pipeline of 12 serious airlines looking at Southend," said Whawell.

The group aims to sway London travellers to use Southend as it would cut travel time by falling below London airspace and thereby cut ticket pricing.

But could we soon soon Eddie Stobart Airlines flying across our skies? 

“It’s not impossible it wouldn’t happen, it’s a household name in the UK and we’ve a strong engine behind that brand name. But on the other end, in Europe, it might not work. The name isn’t so well known.
Instead it would work through another business model, the group’s Stobart Air investment," said chief executive Andrew Tinkler.

"We'd use our engine and brand to help grow an existing airline- rather than spend money marketing the airport, we get a blue chip brand on board to start operating flights which we underwrite."

“Maybe it could be a shared thing, with a double-barrelled name. Stobart-Virgin, EddieJet,” he joked.

Stobart estimated a £30mln investment would be needed, split across the airport and biomass, to fund the required growth. But the group forecast it would generate it back within a year.

The transport and property group reported that revenues had increased by 8.6% to £126.7mln. Pre-tax profit was at £10m, compared with a £9.4mln loss the previous year, and underlying pre-tax profit jumped to £18.4mln from £9.3mln.

Tinkler said: “This year we have delivered improved profitability in all five divisions with the foundations, management and organisational structure almost set to achieve our objectives and deliver our plan.”

The group hopes to see the number of passengers using the Essex airport increase to 2.5mln a year by 2018, that’s more than double the 900,000 customers it attracted in the year ending February 29.

Passenger numbers at its London Southend Airport were lower than previous years due to the terror concern, but the drop was expected. It is now looking to attract more London-based travellers for the summer.

Southend won the best airport in Britain award as voted by the Airport Operators Association.

“Our 45% investment in the airline, Stobart Air, continues to grow with improved passenger volumes and profitability in the year ending December 2015,” said the group.

The group’s aviation boss Glyn Jones is in talks with major operators to add new routes.

It has secured grant funding to develop the runway and other infrastructure requirements to support airlines to operate from its four airports in conjunction with Stobart Air. Tinkler said to expect “rapid growth.”

“This is an exceptional time for the Stobart corporate family and its shareholders,” he added.

“We remain focused on delivering the strategy and realising superior growth and shareholder returns from our strong service, infrastructure and logistics heritage.”

Shares rose 0.7% to 110.50p after peaking at 111.70p this morning.

--UPDATE SHARE PRICE, DIRECTOR COMMENT--

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Price: 17.86 GBX

LSE:STOB
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Market Cap: £112.74 m
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