Silverjet buyout collapses, workers laid off

LONDON, England (AP) - The proposed buyout of collapsed business-class airline Silverjet fell apart on Friday and its 420 employees were formally fired, the administrator said.

Irish based Kingplace Ltd. announced earlier this week that it had provisionally agreed to take over Silverjet, which suspended operations two weeks ago after running out of money.

But Nigel Atkinson and Mark Fry of Begbies Traynor, joint administrators for Silverjet, said Friday that Kingplace was no longer in a position to proceed with a deal.

"We now understand that, as a result of the unusually complex negotiations with third parties, Kingplace is no longer in a position to acquire Silverjet as a going concern," the administrators said. Kingplace is managed by Geneva-based management company Heritage Cie SA.

"As a consequence, we have today had to make the entire work force formally redundant, in line with our legal obligations as administrator."

Silverjet employed 370 pilots and cabin crew and 50 administrative staff.

"We are extremely disappointed to have had to make these redundancies, which we had been working hard to prevent," the administrators said.

"We continue to negotiate the sale of Silverjet's assets for the benefit of the company's creditors and will provide an update as soon as we are able."

Silverjet suspended its service from its base at Luton Airport north of London to Newark airport in New Jersey in the United States and to Dubai, United Arab Emirates, on May 30.

The company reached a crisis when it failed to receive funding agreed under a deal with Viceroy Holdings LLC, an international luxury development fund based in the United Arab Emirates and the United States.

Silverjet, which had never turned a profit since it began operating in 2006, was the last business-class only airline flying between London and New York after the collapse of U.S. peers MAXjet Airways Inc. and EOS.

Source: edition.cnn.com

Silverjet Bought by Kingplace, Plans to Resume Flying

Silverjet Plc, the all business- class carrier that ceased operations 13 days ago, said it plans to resume flying after agreeing to be bought by Kingplace Ltd.

Silverjet, which flew to New York and Dubai from London Luton airport, was purchased for an undisclosed sum in a deal due to be completed by June 13, administrator Begbies Traynor Group Plc said in a statement today. Kingplace is registered in Ireland and managed by Geneva-based investment trust Heritage Cie.

Grounded on May 30 after its funds ran out as fuel costs spiraled, Silverjet never made a profit and was the last business-only operator between London and the U.S. after Eos Airlines and MAXjet Airways Inc. went bankrupt. About 24 carriers have failed in six months after oil jumped 47 percent, according to the International Air Transport Association.

"If it's to be a successful resurrection then they will have to raise fares fairly substantially and hope the increase sticks," said Douglas McNeill, an aviation analyst at Blue Oar Securities in London. "The oil-price rise was the thing that they really hadn't foreseen in their business plan." The airline should consider adding more flights to Dubai, he said.

Silverjet shares were suspended a week ago after an investment from United Arab Emirates-based Viceroy Holdings LLC didn't materialize. The stock was 88 percent lower than when first sold to the public in May 2006, giving a market value of 8.38 million pounds ($16.5 million).

Long-Term Investor

"We now have the necessary backing from a long-term investor to relaunch Silverjet," Chief Executive Officer Lawrence Hunt said in today's statement. "We will be working around the clock to launch our New York and Dubai services as quickly as possible."

Silverjet may be flying again "in a matter of weeks" after terms with Begbies Traynor are finalized, said Ian Ilsley, the chairman of Heritage and a Kingplace director. All of the airline's employees are likely to be retained and existing tickets will be honored, he said.

Almost 10,000 passengers were affected when Silverjet stopped flying, according to the U.K.'s Civil Aviation Authority. The deal announced today is subject to regulatory approval, Begbies Traynor said. The offer from Kingplace is being made on behalf of private clients, it said.

"We are pleased to have agreed principal terms with Kingplace to relaunch the airline," Mark Fry, senior partner at Begbies and joint administrator of Silverjet, said in the statement. "This agreement is excellent news for the company's suppliers, staff and loyal customers."

Cash Needed

Silverjet may need to raise double the $100 million Viceroy had pledged to invest if it's to survive over the next year, said Howard Wheeldon, an analyst at BGC Partners in London. A fare increase of 50 percent might be needed to show a profit, Wheeldon added, even assuming the carrier can fill 85 percent of seats. The company's U.K. hub in Luton may also be unattractive to business flyers and its 767 are less fuel-efficient than more modern designs, he said.

Oil is trading near $136 a barrel, compared with about $55 when Silverjet began flying on Jan. 25, 2007. MAXjet and Eos blamed their failure on higher fuel costs, competition from network carriers and an inability to raise more capital because of the global tightening of credit.

Before the Viceroy pledge Silverjet had garnered about 72 million pounds from an initial share sale, additional stock offerings and loans. The carrier cited the oil price when missing its target of a first profitable month in March.

Network airlines get most of their profit from first- and business-class seats, prompting the idea for premium-only carriers. Congestion at U.K. airports and delays from tighter security also created demand for a hassle-free, luxury service.

Lower Prices

Silverjet aimed to sell premium tickets for about 1,000 pounds, often one-third the price charged by competitors such as British Airways and Virgin Atlantic Airways Ltd. Flights were operated using three Boeing Co. 767 planes with 100 flatbed seats, or less than half the usual capacity. Service included private terminals, onboard women-only toilets and gourmet menus from London restaurant Le Caprice.

Analysts including Mike Stoddart of Daniel Stewart in London had predicted Silverjet would go bankrupt this year as it failed to sell sufficient seats at high-enough prices to cover costs. Stoddart initiated coverage in January with a "sell" recommendation and a price target of zero pence.

CEO Hunt has blamed negative analyst notes for passengers being reluctant to book with the airline.

Route Expansion

Blue Oar's McNeill said Silverjet now needs to expand its route network as quickly as possible to generate cash. The airline had originally planned to add more planes in the second half of this year and any new capacity should be used to increase frequencies, particularly to Dubai, he said.

"The history of Silverjet to date, and indeed Eos, shows that the business-only model has considerable merit," he said. "It has attracted passengers and the service created has been widely acclaimed and copied by some of the larger carriers. All of this suggests is that the concept had merit; all that remains is to make money out of it."

With Silverjet grounded, closely held L'Avion, which flies between Paris and New York, is the last remaining independent airline providing premium-only services across the Atlantic.

Source: bloomberg.com