The owner of Southend airport saw earnings from its aviation interests fall into the red in the first half of the year.
Besides the Essex airport, Stobart Group’s aviation arm also runs regional carrier Stobart Aviation and a ground handling business.
Aviation division earnings [ebitda] for the six months to August 30 dropped to a loss of £2.7 million from a £3.6 million profit in the same period last year.
This included £18.1 million in costs relating to UK Flybe franchise operations by Stobart Air which will end by February 2020.
The Stobart Air franchise has been employed as a “fundamental part” in the growth strategy of Southend airport, which enabled the parent company to attract new services by easyJet and Ryanair.
The expenditure “represents the development of routes operated under the UK Flybe franchise operation,” Stobart Group said.
“Demonstrating route viability and building customer awareness was central to securing a milestone agreement with Ryanair that will allow us to accelerate the growth of the airport.
“Stobart Air intends to grow its valuable relationship with Aer Lingus, maximise its revenue potential and improve load factors on established routes,” the company said today.
“Stobart Air will also leverage the value of its aircraft by securing additional commercial relationships with other airlines.”
Stobart Air carryings increased by almost 17% to 1.1 million in the period.
The aviation arm’s profit decline came despite passenger numbers using Southend airport rising by 37% year-on-year to 838,742.
The airport is now being primed for “substantial growth” in 2019 as part of a target of five million passengers a year by 2022.
EasyJet basing a fourth aircraft at the airport is expected to result in more than one million easyJet passengers this year.
Ryanair’s move to base three aircraft at Southend airport in a five-year deal is expected to bring a further one million passengers a year from summer 2019.
The addition of Air Malta and Adria Airways has enabled the airport to offer routes to an additional 11 destinations, with total passenger numbers expected to reach around 2.5 million next year.
A new agreement with The Restaurant Group will see to six new food and drink brands introduced to the airport.
The group said: “We are driving performance through an improving customer proposition which increases profitability per passenger.
“With our existing airport capacity becoming better utilised as passenger numbers increase, we will leverage this fixed cost base, with additional capital expenditure, resulting in an improved cost per passenger, in turn increasing profitability.
“The progress made with new and existing airlines, combined with our enhanced customer proposition, puts us well on track to deliver our target to welcome five million passengers by 2022.”
The group reported an overall loss of £17.5 million including investment in Southend airport route development and marketing of £18 million.
Stobart Group CEO Warwick Brady said: “We have remained focused on operational progress in our aviation and energy divisions, which have both performed well in the period.
“Having invested in the infrastructure for these divisions, we are now well placed to accelerate our commercial growth plans and demonstrate the value of the group’s excellent operating businesses.”
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