With US$100m in financial support from UAE-based investors, Silverjet is back from the brink. After a turbulent month, CEO Lawrence Hunt is smiling again with a new flight plan in play.
The pressure has been on Lawrence Hunt ever since his airline, Silverjet launched its first flight in January last year.
The CEO has battled analysts’ pessimistic notes to the all-business class airline’s investors, continuously low share price and persistently rising oil prices.
Despite the uphill struggle, Hunt remains surprisingly optimistic. “Will I be here in five years time? Absolutely,” he smiles. “I’m still here now, and people have been predicting for the last four years that I wouldn’t survive.
We are looking at new routes to the West Coast USA, and India. South Africa will be the next route out of London.
Much of the reason for Hunt’s enthusiasm is the US$100m investment pledge he secured at the end of last month. Under the agreement with UAE-based investors, Viceroy Holdings, the Luton-based carrier will receive a US$25m cash injection and an option for a further US$75m.
“We are not in trouble,” insists Hunt. “The environment is different now because of the economic downturn and rising oil prices but our passenger numbers were up 25% in March.
He is adamant that the money from Viceroy Holdings is not to keep the company afloat, but to launch new routes.
Silverjet currently offers flights at around a third less than the price charged by other airlines from London Luton Airport to Newark near New York, and to Dubai.
“The fund which has just invested in us has been set up [with specific] interest in luxury brands, and they are going to help role the brand out across the Middle East, India and Asia,” says Hunt.
The total amount, US$100m, may seem like a lot but in the aviation industry that kind of money can be very quickly swallowed up. And this isn’t the first time Silverjet has had to rely on a cash injection.
Back in November property tycoons David and Simon Reuben agreed to loan the airline US$19.4m, convertible into 18.3 million shares in February this year.
When the time came, the brothers declined to convert the loans into ordinary shares, blaming market conditions, and instead choosing to work with the airline and monitor “its performance going ahead”.
The Viceroy injection, Hunt says, is enough for the “foreseeable future”, depending how quickly the airline grows. But says he’ll need more money to grow the UK business.”We are a public company and the London Stock Market is a very difficult place to be for most companies right now. As we grow we need to raise more capital.
Hunt predicts if oil prices stabilise the airline will break even in two to three months time, not far from its original target of June.
As well as pressure from shareholders – the airline’s value has plunged from US$155m to US$21m – rising oil costs have been a significant battle for Silverjet.
When the airline first started flying, oil was selling for around US$55, and today it is over double that amount. The number of casualties in the aviation industry is already significant, with all-business class airlines apparently bearing the biggest brunt of the rising costs.
Both MAXjet and Eos started business class-only services from London to New York in 2006 and have since filed for bankruptcy. Silverjet is now one of only two all-business class airlines along with French airline, L’Avion. As a result of oil prices Silverjet has been forced to raise its airfares by 20%.
The silver lining in the clouds of the subprime mortgage crisis for Silverjet has been that companies – and most significantly banks – no longer have an open wallet for employees’ business and first class airfares.
Companies can no longer justify expensive airfares and banks have cut their travel budgets,” says Hunt. “As a result we are picking up a lot more corporate business now.
Despite the odds stacked against the airline, Hunt plans to expand, taking advantage of the fact it is now the only business class airline flying from Britain with potential new routes.
“We are looking at new routes to the West Coast USA, and India. South Africa will be the next route out of London,” says Hunt. “We are also putting together a business plan to open up a hub in Dubai.
The airline’s board also plans to add routes to Hong Kong as well as invest capital in three new planes. The aircraft, which are already on order, will double Silverjet’s current fleet from three to six.
The company is still in takeover talks. Hunt hints that although a decision has yet to be made, a deal could be close to agreement. “We have been approached by a number of companies – mainly because our share price has been so depressed.
We are still in talks but haven’t announced anything formal or official yet.
Whatever the situation, Hunt remains confident, at least in front of the press.
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