Silverjet Stops Flights As It Runs Out Of Cash

May 30, 2008

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Britain's Silverjet has become the third business class-only airline flying between London and New York to collapse, after failing to get an emergency USD$5 million loan.

The company, launched at the start of 2007, on Friday called in administrators, grounded its fleet and said it did not believe there was likely to be any value realized for shareholders.

Sky-rocketing fuel prices and worsening economic conditions in Britain and the United States have buffeted Silverjet, having already sent rivals Eos and MAXJet out of business.

The airline industry was keenly watching business class-only airlines since the first started flying in 2005 to see whether they could steal lucrative customers from established airlines such as British Airways and Virgin Atlantic.

The new airlines tried to entice premium customers away from other transatlantic carriers with cheaper tickets, more leg room and quicker check-ins at non-hub airports such as Luton and Stansted, both north of London.

Silverjet, which flew 88,000 passengers in just over a year, said on Friday it had not been able to get its hands on a hoped-for USD$5 million loan from Abu Dhabi-based investors that had been initially agreed.

Administrators from Begbies Traynor will now undertake a review of assets.

The airline had needed the emergency injection of cash to avoid grounding its fleet of three planes -- which also operate between London and Dubai -- for good.

"The Silverjet team has worked exceptionally hard to try and turn this situation around; however, with the time available, we were unable to secure the funding required to continue our operations," Lawrence Hunt, Silverjet's former CEO, said in a statement.

Douglas McNeill, transport analyst at Blue Oar Securities, said: "The climate for attracting capital into the airline industry has never been worse."

Silverjet, based at London's Luton Airport, said Abu Dhabi-based fund Viceroy Holdings had failed to give it the first USD$5 million of an GBP8.4 million pounds (USD$16.6 million) loan facility.

Shares in the airline were suspended last week after it said it had not received the loan from Viceroy that was meant to guarantee its future in a tough economic climate.

Hunt apologized to customers who had been planning to travel with Silverjet and advised them to seek alternative arrangements with other carriers.