Construction BUSINESS

Dublin-based carriers CityJet and Stobart Air are investigating a tie-up in a way that could create one of Europe’s biggest regional airline groups, the Irish Independent has learned. The deal would be addicted on the final result of a sales process for Stobart Air, however.

Stobart Air, which performs the Aer Lingus Regional service, is presently up for sale, with bids likely to value it at between €60m and €65m.

The Irish Independent also recognizes that Stobart Air management, led by chief executive Sean Brogan, have tabled a bid to buy the airline as the struggle for control heats up. It’s likely that such a bid could catch support from Aer Lingus, for instance, which also has a commitment in a company that leases aircraft to Stobart Air.

The Stobart Air sales process began last year, after shareholder Invesco Perpetual indicated that it wanted to exit its participation in the business. It owns 40pc of Stobart Air, which was beforehand known as Aer Arann.

UK transport group Stobart owns 45pc of the airline, while broker Cenkos has a 10pc stake. Former Aer Arann chairman Padraig O’Ceidigh owns 5pc. Aer Arann was purchased out of Examinership in 2010 by the current association of owners.

It’s understood that the Stobart Group cares in selling its stake, but at the same time working with a potential bidder for Stobart Air to approve a tie-up between the airline and CityJet. The Stobart Group also owns Southend Airport, east of London in Essex.

It’s not sure if the possible tie-up between Stobart Air and CityJet would happen if Stobart Air management are effective in their buyout bid.

A Speaker for the Stobart Group did not reply to queries, while a spokesman for Stobart Air rejected to comment. Invesco rejected to comment as well. CityJet chairman Pat Byrne, who has just completed the acquisition of CityJet from Germany’s Intro Aviation along with a number of private investors, was not contactable yesterday.

It’s understood that up to three bids have now been preserved for Stobart Air, involving an offer from Dublin-based Aviation Finance Company.

If Stobart Air and CityJet did seal a formal tie-up, it could create a major European regional airline group.

Stobart Air produced revenue of €127m in 2014, the latest set of publicly obtainable accounts for the business show. That was 24pc higher than in 2013. Stobart Air made a €13.5m operating waste in 2014. But Sean Brogan stated earlier this year that the company had been profitable in 2015.

Stobart Air operates the Aer Lingus Regional service on a franchise basis for Aer Lingus, which is now owned by IAG.

Its main zoom is feeding passengers from the UK to Dublin, where they can interface to Aer Lingus transatlantic services. It operates some services for FlyBe, and carried a total of 1.3 million passengers in 2014c as well.

CityJet, which had been heavily waste-making since 2008 under the property of Air France-KLM, narrowed its losses to €23m in 2014 on revenue of €121m. Its main operational base is London City Airport, in the docklands area, and it executed two million passengers last year.

Mr Byrne has predicted that the airline will make a “modest” profit this year, and expects revenue to hit about €300m in the next 2 years.

CityJet inked a wet lease agreement with SAS to operate regional flights in Scandinavia for the airline in the last year. The Dublin airline also acquired SAS subsidiary Blue1, and reserved eight Bombardier aircraft to operate the service. CityJet has also acquired up to 31 Sukhoi Superjets, valued at over €1bn.