Silverjet still airborne after Middle East bail-out

Silverjet has narrowly avoided becoming the third failed business-class airline - but for how long?

by
Last Updated: 31 Aug 2010

Silverjet, the loss-making business-class-only airline, announced today that it’s managed to persuade an unnamed Emirates-based investor to inject $25m in exchange for a 28% stake. And that’s not all – this mysterious benefactor (rumoured to be the Abu Dhabi sovereign wealth fund) also plans to invest a further $75m to develop the Silverjet brand internationally, with new routes to the Middle East, the Far East and Africa.

In the week that rival Eos went bust, this deal represents a bit of a result for Silverjet – particularly as it seems to have been done in the nick of time. CEO Lawrence Hunt, who’s spent the last few weeks touting his airline around to anyone who’ll have it, was insisting today that the Middle East cash was a long-term investment, not an emergency lifeline. But that doesn’t really tally with the company’s statement, which said that if the deal fell through for any reason: ‘Silverjet will have to source alternative means of funding as a matter of urgency’. In other words, it was basically down to its last few pennies before this investor rode to the rescue. Now it should at least survive the year.

To be fair to Silverjet, it’s a rotten time to be running a high-end airline. The credit crunch is making debt more expensive while at the same time encouraging firms to cut back on business travel, and of course the soaring fuel price means that it keeps getting more expensive to refuel planes. So it’s not really any wonder that Maxjet went bust before Christmas, or that rival Eos gave up the ghost on Monday this week. It’s a jungle out there…

However, Hunt believes that their demise represents a big opportunity for Silverjet – because it means the competition is less fierce. Sales were apparently up 300% on Monday, the day Eos went bust (partly because he offered to re-accommodate all its disgruntled passengers, to be fair). And it’s certainly not short of admirers – passengers have been raving about its service in the last year or so, particularly given it’s less than half the price of traditional business class.

On the other hand, perhaps that’s the problem. The airline has failed to make a profit ever since it launched in January 2007, missing its latest break-even target last month. And its stock market performance has been lamentable – its shares have tanked by almost 90% since flotation. So it’s been a disastrous investment for just about everyone so far – let’s hope these Middle Eastern folks have better luck, and are not just delaying the inevitable...

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