Silverjet suspends operations

Business-class only airline Silverjet has gone into administration after financial problems forced it to suspend all its flights.

With this development, Silverjet, which had started services in January 2007, became the third business-class-only airline in just six months to cease operations. L'Avion, a French privately owned airline that flies between Paris and New York, is the last remaining independent business-class-only carrier to fly across the Atlantic.

Silverjet stated: "Silverjet announced on 23 May 2008 that it had yet to receive the proceeds of the

US$5.0 million drawdown request made under its loan facility with Viceroy Holdings LLC. It also announced that its working capital reserves were limited and that advances under the loan facility were required as a matter of urgency. Silverjet has not received any further sums from Viceroy."

It added, "Silverjet continues to be in discussions with investors interested in supporting the business of Silverjet, however it has yet to conclude such discussions to its satisfaction. It is with deep regret that the Board of Silverjet has therefore decided that it must suspend operations with immediate effect."

Silverjet operated two daily services between London Luton and Newark Liberty International Airport, which serves New York City, and one between Luton and Dubai. The average cost of a return fare was £1,000.

The airline struggled with high oil prices, the credit crisis and subsequent economic slowdown, as well as the normal operational problems experienced by start-up airlines.

"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," said Lawrence Hunt, Silverjet's former chief executive.

Silverjet administrator Begbies Traynor said it was negotiating a potential sale of the business with "interested parties" and urged potential suitors to come forward, but shareholders are unlikely to benefit, according to Silverjet.

"A number of interested parties have already been in contact, ahead of our appointment as administrators, and we are confident of achieving a sale given the attractions of the company," said Mark Fry, partner, Begbies Traynor.

British Airways chief executive Willie Walsh recently said that he did not believe there was anything wrong with the business model of Eos and MAXjet.

He reportedly said: "I just think they underestimated how long it would take to get to break-even. Any airline start-up is always going to struggle and it becomes even more difficult for a thinly capitalised competitor in these markets with oil at around $130 a barrel."

When Silverjet launched its first flights in January 2007, oil was trading at just over $50 a barrel and the company's shares were trading at 150p. Silverjet shares were suspended at 13p.

"A crisis point is fast approaching for the aviation industry," Numis analysts Wyn Ellis and Richard Carter reportedly said. "There are likely to be a number of spectacular casualties as brutal economic reality hits home."