Stobart Group Ltd (LON:STOB) expects its Southend Airport to become the next major airport servicing the London area as its competitors struggle with capacity constraints.
The company has been investing in the expansion of the airport to accommodate more than 10mln passengers.
In the year ended February 2019, passenger numbers rose 33% year-on-year to 1.5mln and the company is aiming to welcome 5mln customers by the end of the 2023 financial year.
Southend the 'jewel in the crown' for Stobart
While it still has a long way to go reach the same level of demand seen at Gatwick, Heathrow, Luton and Stansted, Stobart boss Warwick Brady said he thinks Southend has potential to become the “next big airport for London”.
“The jewel in the crown for our business is Southend and essentially I think it’s a trophy asset for London,” he said.
Brady added that the London travel market is the largest in the world, making it difficult for the main airports around the city to cope with the millions of passengers they attract each year.
READ: Stobart and Virgin-backed Connect Airways receives EU approval for Flybe takeover
He pointed out that Heathrow, which welcomed 80 million passengers last year, is building a third runway but is not due to open until 2026.
For passengers, Brady said Southend is one of the best airports near London for avoiding crowds and for ease of travel with six trains every hour at peak from London Liverpool Street station.
He said the time it takes to get from Liverpool Street to Southend Airport station, which Stobart’s rail division built, is roughly the same amount of time it takes to get to Stanstead.
“I think the key to London Southend is the planes are about 100 yards from the railway station so once you get to Southend we are the best airport in London because it is the easiest by miles.”
The airport has a commercial deal with the Restaurant Group PLC (LON:RTN), which owns Frankie & Bennies, Chiquito and Garfunkel, to include some if its restaurants. It also has cafes, a pub, a champagne bar, a WH Smith, a world duty free shop and a Holiday Inn hotel.
Airports 'extremley valuable' asset for investors
For investors, Brady said the airport is growing year on year despite Brexit concerns and political uncertainty.
“Airports are extremely valuable because they are 30-40 year assets for shareholders, they have long-term cash generation, they are asset backed,” he said.
Airlines that use Southend include easyJet PLC (LON:EZY), Ryanair Holdings PLC (LON:RYA), Loganair, Air Malta and Flybe that fly to over 40 destinations across Europe.
Connect Airways, the joint venture between Stobart, Virgin Atlantic and New York hedge fund Cyrus Capital, recently received clearance from European regulators for its £2.8mln takeover of Flybe.
The consortium, which completed the acquisition of Stobart Air’s assets for £40mln in February, will rename Flybe using the Virgin brand.
Brady said the plan is to create a “Virgin-branded network to complement our portfolio of airlines at the airport”.
Carlisle Lake District Airport restarts flights
Stobart also owns the Carlisle Lake District Airport, which this month restarted passenger flights for the first time in 25 years.
The group has agreed a partnership with Scottish airline Loganair, which will serve Belfast City, Dublin and Southend from the Cumbrian airport.
The other core division is the renewable energy business, which Brady said is performing “very well”.
The energy arm supplies energy from waste wood to 30 plants. It makes revenue from picking up the waste wood, processing the wood into chips and putting the chips into the plants.
Last year the business supplied 1.3mln tonnes of wood chips from its six processing facilities and is targeting 2mln tonnes in the near term.
Brady said the energy unit’s contracts will last 15 years and are linked to the retail price index – the higher level of inflation. With volumes up 30% year on year, he reckons there is “some very positive growth there”.