Merger of Cityjet and Stobart Air likely to be completed shortly

A merger between Cityjet and Stobart Air, which runs the Aer Lingus Regional airline network, looks set to be completed shortly.

Stobart Group, a publicly-quoted UK company which owns 45 per cent of Stobart Air, said yesterday that it had bought Invesco's stake in the airline and in a company which leases aircraft to Stobart. This is seen as part of a tidying up exercise before the Cityjet deal.

The merger, in which Cityjet would be the major player, is expected to be completed by the end of the month.

Cityjet was bought by a group of investors led by chairman Pat Byrne earlier this year from Intro Aviation, a German finance house.

As part of the transaction a company called Falko, a large aircraft lessor backed by Fortress Capital, is expected to take a controlling stake in Propius, the leasing company.

Stobart Group invested in the airline – the former Aer Arann – in 2010 , allowing it to exit examinership. Invesco bought into the airline and the leasing company in 2012.

Equity value

Stobart is buying Invesco’s 33 per cent interest in Propius for £12 million, bringing its holding to 66.6 per cent and indicating an equity value on the leasing company of £36 million. Aer Lingus owns the remaining 33.3 per cent.

Stobart Group also said on Wednesday that it has entered into a conditional deal to acquire at least 36 per cent and up to 40 per cent of Everdeal, the operating company for Stobart Air, from Invesco for £500,000, increasing its holding to 80 per cent.

The exact amount Stobart will buy will depend on whether other shareholders take up their pre-emption rights to buy some of Invesco's stock. British stockbroker Cenkos owns 10 per cent of Everdeal, and businessman Padraig O'Ceidigh, the Aer Arann founder and former chairman, owns 5 per cent.

The announcement on Wednesday said that Propius made profits of $7.5 million (€6.8m) last year, and that Everdeal made profits of €500,000.

Passengers routes

Stobart Air operates regional air services between a variety of centres in Europe and the UK, with Southend Airport being a key base. It is the operator of the Aer Lingus Regional network. The announcement said that the transactions “ will enhance Stobart’s flexibility in building new passengers routes at Stansted airport”, indicating that it will retain some stake in the merged airline.

Cityjet operates from London City Airport. Its chief commercial officer Cathal O’Connell told Air Transport World recently that “the company was heavily loss-making, but that situation is not going to continue. We’ll turn into profit certainly in 2017, if not in 2016.”

Talks between Cityjet and Stobart have been ongoing for some months now , but informed sources believe a deal is imminent.