Silverjet seeks emergency funds after rescue loan fails to appear

Silverjet is seeking emergency funding from investors this weekend after a cash crisis forced it to suspend trading in its shares. Trading in the business class-only airline, launched less than 18 months ago, was halted yesterday after it warned that a funding line promised by the UAE investment group Viceroy had so far failed to materialised.

Silverjet said last month that Viceroy had agreed to invest £12.7m in the company after a deterioration in its working capital and reserves. The airline tried to draw down around £2.5m of this money earlier this month but has yet to receive the money.

"Advances under the loan facility are required as a matter of urgency," the company said. "In the circumstances, Silverjet has requested, and the London Stock Exchange has confirmed, an immediate suspension in the trading of the ordinary shares of the company on the Alternative Investment Market."

A spokesman for Silverjet added that Viceroy had been unable to access the cash it had committed to the airline, but that the fund, which could not be contacted yesterday, still insisted it was keen to invest. He added that the airline was still in discussions with other parties about possible investments and had yet to rule out a takeover offer.

However, Mike Stoddart, an analyst at Daniel Stewart, warned that the company was unlikely to regain a listing. "In addition to problems with the business model ... the meteoric rise in the oil price has added further misery," he said. "Against this background, we do not think anyone will bid, and that for Silverjet to survive, current shareholders will need to inject large amounts of capital."

Douglas McNeill, an analyst at Blue Oar Securities, added: "There must now be serious question-marks over the likelihood of this promised investment materialising. We're told they're having ongoing discussions with other potential investors, but it's impossible to say what stage those are at, and the climate for attracting fresh investment in airlines is extremely poor."

Silverjet's four daily flights from Luton to New York and its two daily flights from Luton to Dubai will, for now, run as scheduled, though the airline anticipates making an announcement on its future within days.

If the airline has to stop operating it will be the final one of three companies set up to offer business class-only services on transatlantic routes. The American airline Eos filed for chapter 11 bankruptcy protection last month, while Maxjet collapsed at the beginning of the year.

Silverjet's founder and chief executive, Lawrence Hunt, expressed confidence in the airline's future last month, with 10,600 passengers flying with it in April, its best monthly performance.

However, like its rivals, Silverjet has been unable to cope with the dramatic rise in the oil price. Mr Stoddart estimated the cost of fuel for each round trip to New York was now £44,000, up from £28,600 just six months ago.

The company charges a headline fare of around £1,100 for seats on its flights to New York, about a third of the cost of business-class passage on most carriers, though the average customer paid around £600 last month.

The price of a barrel of oil rose above $135 for the first time on Thursday, but fell back to close yesterday at $132.19. The increases have caused problems for the global airline industry, with American Airlines this week cutting flights to limit its losses. Air France posted a first-quarter loss of £430m on Wednesday, while Qantas and Japan Airlines have raised fares this week.

Silverjet shares traded at 13p before their suspension, down from a high of 175p last June.