Aer Lingus likely to get penalty fee in wake of Stobart failure

Airline owner Esken responsible for ‘certain obligations under the franchise agreement’

Aer Lingus regional route operator Stobart Air: traded profitably until Covid-19  struck, severely limiting air travel.

Aer Lingus regional route operator Stobart Air: traded profitably until Covid-19 struck, severely limiting air travel.

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Aer Lingus is likely to receive a penalty payment following the failure of its regional partner, Stobart Air, at the weekend.

Stobart Air, which operated the Aer Lingus regional franchise, ceased trading with the loss of 480 jobs, after its owner, British transport and aviation group Esken, ended cash support for the Irish airline.

It has emerged that Aer Lingus is due to receive a penalty payment as a result of Stobart Air’s terminating the contract to provide the larger airline’s regional services before it was due to end in December next year.

In a statement, Esken said it remained responsible for “certain obligations to Aer Lingus under the franchise agreement” that became payable following its termination.

Neither Esken nor Aer Lingus would comment on Tuesday or give details of the amount due.

Majority stake

Esken noted that the guarantees were given in 2017 and were the reason it reacquired Stobart Air from Connect Airways in April last year.

The British company originally owned a majority stake in Stobart Air. An employee trust also held shares, but transferred this to Connect, a new company which Esken formed with other backers, in 2018.

However, Connect went into administration after that company’s other subsidiary, British regional airline, Flybe, was wound up in early 2020.

This prompted Esken to reacquire a near-80 per cent stake in Stobart Air in April last year for €9.8 million, giving it effective control of the business.

The High Court appointed Deloitte Ireland partners Ken Fennell and Mark Degnan as provisional liquidators to Stobart Air this week.

Aircraft leases

Esken guaranteed the leases on Stobart’s 13 aircraft. The airline leases these from a related company, Propius, which rents them from Goal Leasing.

Stobart itself directly leases three planes from Nordic Aviation Capital and two from GE Capital Aviation Services.

Esken calculated at the weekend that it could face a bill of £18 million sterling in its current financial year if it failed to sublet the aircraft.

Stobart had been trading profitably until Covid struck last year, severely limiting air travel.

Esken said it would not fund the airline indefinitely and put it up for sale last year.

However, hopes of a rescue were dashed when it emerged that the potential buyer, Isle of Man-based Ettyl Ltd, could not raise the cash needed for the deal.

Esken told the Stobart board on Friday that it could no longer finance the airline.