Silverjet share price crash after announcement that Flyjet will stop flying in October
09.08.07
All-business class airline SilverJet announced yesterday that it will not be renewing its subsidiary Flyjet's leases on two Boeing 757s at the end of October, and the airline's shares fell by almost 25 percent as a result.
Flyjet operated charter flights for a number of holiday companies from Newcastle Airport, but had experienced a number of reliability problems, causing long delays for passengers recently. Silverjet said in a statement that it was withdrawing from the charter flight market 'owing to a challenging package holiday market.'
The Luton Airport-based airline said that it did not intend to secure further aircraft when the leases on the two Boeing 757 aircraft operated by its wholly owned subsidiary, Flyjet expire on October 31. It said that the company, which it acquired on October 2 last year, will cease operating charter flights from that date.
The acquisition of Flyjet enabled Silverjet to begin commercial flights to New York from its Luton base in January 2007, nine months after it raised its initial capital and six months earlier than would otherwise have been possible without the purchase, which the directors estimate brought forward net revenues in excess of £3m.
It also allowed the company to lease a Boeing 767 significantly below current market rates, with the directors estimating Silverjet will save £3m over the duration of the lease compared to current market lease rates, and to acquire its Air Operators Certificate, operating licence and a world wide route licence, which allowed the new airline to avoid significant set up and operating costs, put at £10m over a 3 year period.
In addition to the Boeing 767 aircraft, the subsidiary leased two Boeing 757 aircraft until November 2007 and January 2008 respectively, which are chartered to various tour operators until October 2007.
Silverjet said that it expected withdrawing from the charter business to cost approximately £300,000, in addition to the cost of the aircraft required on the scheduled return of the aircraft to the leasing company. The company added: 'The core business of Silverjet is its all business class service and the Directors see insufficient returns from continuing to offer a service in the charter market.'
Shares in the airline dropped by 24 percent - or 27.5p - to 83p yesterday and continuing to fall today, down another 3p. The shares were already down on news that the airline had delayed the introduction of its second daily return flight on its single route due to plane problems.
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