Silverjet turns in its wings
31 May 2008
The UK's all-business class airline, Silverjet plc, has announced that it is grounding its planes and halting operations as it was unable to secure the investment as needed to say viable.
With CEO Lawrence Hunt at the helm, Silverjet offered business-class flights to Newark Airport in the United States, and to Dubai from its Luton hub in the UK. Silverjet held an initial public offering on London's AIM, or Alternative Investment Market, in May 2006, and had commenced flights to Newark in January 2007.
Silverjet's announcement comes within weeks of its previous statement announcing that it had signed a memorandum of understanding (MoU) with an investor in the United Arab Emirates and that they will provide it with new funding. Silverjet had said at the time that its working capital had deteriorated and it needed funding ''as a matter of urgency''. (See: All-business class British airline, Silverjet, secures $25m lifeline from UAE investor)
United Arab Emirates-based Viceroy Holdings had on May 2 agreed to loan Silverjet £8.4 million ($16.6 million) and subscribe for £4.3 million worth of shares but it was unable to release the funding to meet its obligations.
Silverjet had earlier announced on 23 May that it had yet to receive the proceeds of the $5 million drawdown request made under its loan facility with Viceroy Holdings LLC (''Viceroy''). (See: Silverjet fails to secure financing – trading of shares suspended temporarily)
It also announced that its working capital reserves were limited and that advances under the loan facility were required as a matter of urgency. Silverjet has not received any further sums from Viceroy. In a statement, the company said ''It is with deep regret that the Board of Silverjet has therefore decided that it must suspend operations with immediate effect.''
In the six months ended September, Silverjet posted an operating loss of £13 million. The company's shares were suspended at its request on 23 May, at a price of 13 pence, at which price the group is worth £8.4 million. That is a shadow of its former self from a year ago, when it was worth £119 million.
Silverjet is the latest casualty in the business-only airline market, with peers Eos Airlines Inc. and MAXjet Airways Inc., having already filed for Chapter 11 bankruptcy protection. MAXjet was the first to stop flying last year, after it could not find critical funding to sustain operations. EOS followed in MAXjet's footsteps a month ago. The combined onslaught of spiralling oil prices, the dual blow from the credit crisis and the economic slowdown, and the usual operational issues experienced by start-up airlines has seen all three business-only airlines into the ground, and is the most glaring example of the wider pain and suffering of the airline industry.
British Airways chief executive officer Willie Walsh had said last week that he did not believe that anything was wrong with the business models of Eos and MAXjet, and by that turn, that of Silverjet. He attributed the lion's share of troubles at these three ''thinly capitalised'' airlines to oil prices at around $130 a barrel. At the time Silverjet launched its operations in January 2007, oil was just over $50 a barrel. British Airways itself has issued warnings earlier in the month that spiralling oil prices could make its profits disappear.
