Shares of the AIM-traded, business class only airline, Silverjet were flying high today hitting a price of 40.00p in the afternoon trading.This jump comes after yesterday's losses which were prompted by an exceedingly pessimistic research report from broker Daniel Stewart. The company responded after trading closed yesterday with a criticism of the 32 page report which it said contained a number of material mistakes and inaccuracies.
Daniel Stewart has given Silverjet a 'sell' rating and a 0p price target, saying it expects the business-class only airline to run out of money. In its first note on Silverjet, the broker predicted pre-tax losses of £31m in the year to March 2008 and around £27m the following year.
It noted that high operating costs resulted in the airline, which flies to and from London, New York and Dubai, losing £11.7m in the half year to September, despite selling 70% of available seats.
High jet fuel prices will continue weighing on the airline, Daniel Stewart said. The broker also rubbished Silverjet's claim that it only needs to sell a certain number of seats to break even, saying this ignored other costs, such as advertising.
However, Silverjet were ready to fight for its right and said the broker’s report was full of inaccuracies.
In a 32-page report the company said that the current average cost per rotation is £75,000 rather than the £135,000 quoted by the Daniel Stewart research note.
Liability for maintenance of £9.7m is payable over the ten year term of the lease and not the majority in the current financial year.
Five thousand bookings were made with the airline last week and one-fifth of its business is now through repeat bookings. The new Dubai route is performing ahead of expectations and the company is in a strong financial position, having recently raised £22m.
In its research note, Daniel Stewart said it expects Silverjet to produce a bigger loss in the second half than the first and to incur substantial losses next year.
Reference
www.flysilverjet.com
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