Irish airlines might join forces to create new European giant

Dublin-based carriers Stobart Air and CityJet are exploring a tie-up in a move that could create one of Europe’s biggest regional airline groups, the Irish Independent has learned.

The deal would be dependent on the final outcome of a sales process for Stobart Air, however.

Stobart Air, which operates the Aer Lingus Regional service, is currently up for sale, with bids likely to value it at between €60m and €65m.

The Irish Independent also understands that Stobart Air management, led by chief executive Sean Brogan, have tabled a bid to buy the airline as the battle for control heats up.

It’s likely that such a bid could receive support from Aer Lingus, for instance, which also has a stake in a company that leases aircraft to Stobart Air.

The Stobart Air sales process began last year, after shareholder Invesco Perpetual indicated that it wanted to exit its involvement in the business.

It owns 40pc of Stobart Air, which was previously known as Aer Arann.

UK transport group Stobart owns 45pc of the airline, while broker Cenkos has a 10pc stake. Former Aer Arann chairman Padraig O’Ceidigh owns 5pc.

Aer Arann was bought out of Examinership in 2010 by the current consortium of owners.

It’s understood that the Stobart Group is interested in selling its stake, but at the same time working with a potential bidder for Stobart Air to approve a tie-up between the airline and CityJet.

The Stobart Group also owns Southend Airport, east of London in Essex.

It’s unclear if the possible tie-up between Stobart Air and CityJet would happen if Stobart Air management are successful in their buyout bid.

A spokesman for the Stobart Group did not respond to queries, while a spokesman for Stobart Air declined to comment. Invesco also declined to comment.

CityJet chairman Pat Byrne, who has just completed the acquisition of CityJet from Germany’s Intro Aviation along with a number of private investors, was not contactable yesterday.

It’s understood that up to three bids have now been received for Stobart Air, including an offer from Dublin-based Aviation Finance Company.

If Stobart Air and CityJet did seal a formal tie-up, it could create a major European regional airline group.

Stobart Air generated revenue of €127m in 2014, the latest set of publicly available accounts for the business show. That was 24pc higher than in 2013.

Stobart Air made a €13.5m operating loss in 2014.

But Sean Brogan said earlier this year that the company had been profitable in 2015.

Stobart Air operates the Aer Lingus Regional service on a franchise basis for Aer Lingus, which is now owned by IAG.

Its main focus is feeding passengers from the UK to Dublin, where they can connect to Aer Lingus transatlantic services.

It also operates some services for FlyBe, and carried a total of 1.3 million passengers in 2014.

CityJet, which had been heavily loss-making since 2008 under the ownership of Air France-KLM, narrowed its losses to €23m in 2014 on revenue of €121m. Its main operational base is London City Airport, in the docklands area, and it carried two million passengers last year.

Mr Byrne has predicted that the airline will make a “modest” profit this year, and expects revenue to hit about €300m within two years.

Last year, CityJet signed a wet lease agreement with SAS to operate regional flights in Scandinavia for the airline.

The Dublin airline also bought SAS subsidiary Blue1, and ordered eight Bombardier aircraft to operate the service.

CityJet has also ordered up to 31 Sukhoi Superjets, valued at over €1bn.

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