Silverjet - Serious Fraud Squad investigates

The UK's SFO has received a complaint and has opened an investigation according to the UK's Daily Telegraph into the circumstances surrounding the abortive attempts to salvage the airline prior to its demise in May of this year.

It has always been somewhat fishy in the public announcements that came from Silverjet up to and including its CEO standing up in public at the Arab Travel Mart in Dubai earlier that month. Whether the Silverjet people were telling porkies to hype up their value and close the deal before it was actually consummated or the proposed investors were telling porkies remains to be seen. Possibly both.

Either way it was ugly and a lot of people lost money and jobs. If this is what it takes to get to the bottom of the mess - so be it.

I for one will be very interested in this outcome.

Cheers

Timothy

Silverjet's Final Thank You Letter

Today Lawrence Hunt finally threw in the towel on Silverjet and sent out a farewell letter to prospective and actual Silverjet users.

So the excuse for the demise was the high bonding requirement set by the CAA. However this requirement is standard and given the first failure and cessation of services it was a wise move by the regulator.

The only value left is in the AOC and perhaps the name. The former now comes with a high bond requirement and the latter probably is not worth anything.

The staff were a fine group and clearly provided an above average service. Finding jobs in this current climate with a huge number of axed and soon to be axed Airline staff, their job prospects will be low. Although the Middle East Carriers are anxiously looking for qualified customer facing staff.

Best of luck to them

Cheers

Timothy

Lawrence Hunt lashes out at Analysts over Silverjet failure

Lawrence Hunt has decided that it is all the fault of the Analysts and not anything that he had done which resulted in the fall of his pet airline Silverjet. Since we have the benefit of Monday Morning Quarterbacking, here goes.

In Saturday's Daily Telegraph he is quoted as saying "..."It's not the oil price, it's confidence," said Mr Hunt. "When you have analysts who know nothing about our business writing what they write, it becomes self-fulfilling. It's the analysts that have killed us. " Further he goes on and insisted "Our business model is resilient to oil. We have been able to lift our prices by 20pc in the past few weeks."

Well I have to differ with the apparently still affable Mr Hunt. Oil AND your business model - not to mention a number of what I would call "missteps" by your Silverjet management are the root causes. As one famous person once expressed it "It's the economy stupid!!!" The analysts are not stupid and he would be surprised at how much they actually do know. Apparently more than him - with this benefit of hindsight.

If we follow his logic that the model is "resilient" to oil then surely he would have been able to increase his fares by at a minimum of 50% over the last year to cover the cost of oil. That did not happen by any measurement.

I am sorry to see the model fail. I actually flew Maxjet once (for less than the regular advance purchase coach fare on a US Network carrier). There are lessons for everyone here. I just hope for Larry's sake that when anyone looks up the word "hubris" in the dictionary his picture isn't near it.

Sadly biz class standalone model RIP

Niche Low Cost Business Class Airline Model RIP

Silverjet threw in the towel today. Ceasing operations after valiantly attempting to stay afloat. They needed but $5 million to keep the operations open but after being refused a lifeline loan and the deal with Viceroy falling through there really was no chance.

There is an old Axiom if you do business in the GCC. An LOI is worth nothing. Only the money in the bank is the ultimate test. As one of our friends put it, precision for a Brit and a Yank is about 90% done. In the GCC it is only about 50%. Clearly this was a lesson that Silverjet’s management had not quite learned. There will be a lot of mad people out there now, individual investors and those who plowed money into it.

The demise of Silverjet follows EOS and Maxjet. Eos actually had quite some months of operation in cash before they needed their injection . But despite everything they knew the situation was hopeless. In the GCC this model could have worked with newer aircraft and a smaller number of seats based on frequency. However the low cost high end airline in Saudi Arabia Al Khayala soldiers on but it is a short haul carrier offering service inside the 3 major cities and erratic service to Dubai. We believe that like its sister company NAS Air it is not making money.

So L’Avion is the last one left. If they have any sense they will seek protection under the wing of Air France. PrivatAir on a ACMI basis seems to be doing just fine.

Alas poor biz class model – we hardly knew thee.

Cheers

Timothy

So Does Predatory Behavior Pay? Let's Ask...

American Introduced JFK-STN services in 2006 specifically to counteract the threat of the new low cost Business Niche players which at the time included EOS, Maxjet and Silverjet. They even went to double daily in 2007. Today they announced the cut back of the service and cancellation of the route effective July 7th. Thus leaving AA with a single gateway for all of London.

I guess they were able to achieve what they wanted. Too bad about the collateral damage.

Concorde Gone... and now forgotton - The market for Premium Seats

While some of us bemoan the forced retirement of Concorde there is however a very vibrant market for premium traffic.

If we take the Londont to New York route in Concorde's heyday there were the following flights between London (LHR and LGW) and New York (EWR and JFK):

British Airways 5X - Newark 1, JFK 4 Plus 2 Concorde
American Airlines 4 JFK-LHR
Virgin Atlantic 5 various combos PLUS CO code share
United 3
Continental 2 plus VS code share
Air India 2
Total 21 Flights per day plus 2 Concordes.

Thats a healthy bit of competition.

Fast forward to this summer (using August 12th as the date) and we have even more flights 35 flights daily with premium seat share of the new entrants at a healthy 22% of all premium seats. For clarification a premium seat is a C/J/P/F class seat not premium economy.

With Virgin and BA poised to make an entry into the market we anticipate that the segment will continue to grow. This trend is likely to spread to other markets where already there is premium single plane service on many other sectors including flights offered by Air France, L'Avion, Lufthansa, Swiss International, KLM. We believe that certain other markets will see the introduction of premium service. Even Maxjet filed for one of the US-China frequencies this month.

If general traffic and therefore yields go soft next year as has been predicted (we are still pondering that question) will traffic in the premium plane business also soften? Will the premium traffic take a load of the depressed Coach yields?

Good questions all - stay tuned

Cheers

Note on sources - Source Material is OAG, SeatGuru, IATA and Airlines directly.