It is the summer of 2005 and John Bavister is sitting in a room at the Royal
Ocean Racing Club. It is here that he bumps into an old colleague – serial
entrepreneur Lawrence Hunt, the founder of no less than six travel and
Bavister first met Hunt in the mid-nineties when, as the finance service
director of High Street travel chain Going Places, he contracted Hunt to revamp
the point-of-sale technology in 800 stores. It was a huge project, and Bavister
and Hunt got to know each other well before going their separate ways at the
Now reunited, Hunt asks Bavister if he wants a challenge. Bavister says he
does and less than a year later he finds himself on an investor road show
pitching investors to back an airline with no aeroplanes.
The airline is Silverjet, a unique service provider offering only business
class seats. Since his chance meeting with Hunt, Bavister has served as the
company’s finance director, listing the business on AIM in May 2006 and helping
to successfully launch its first route between London and New York.
Bavister says that taking the company to market literally was ‘floating a
paper airline’. ‘Our investor presentation was literally a piece of paper that
said if you give us the money this is what we can do,’ Bavister says.
Silverjet may not have had an aeroplane at the time, but it did have a strong
management and an inventive business plan. The City went for it and the company
has never looked back.
What makes Silverjet such a unique offering is that it has positioned itself
to target the lucrative business passenger market, without having to run
less-profitable economy class cabins. ‘You have to have a business class seat if
you are on a business trip, otherwise you can’t function on the other side, but
do you have to pay a substantial amount for the privilege of doing that?’
‘Lawrence Hunt always got to the end of the financial year, and would look at
the amount of money he had spent on travelling to New York and Silicon Valley
and thought that there had to be a better way. So he started doing the research.
He came to the conclusion that airline economics, particularly across the
Atlantic, are biased in the sense that what you tend to find is that the
transatlantic carriers are subsidising the bulk of the aircraft, which is the
economy cabin, out of sales and what happens in the premium economy and upper
class cabins,’ Bavister explains.
He proceeds to reel of the numbers to fill out the thinking. The broad
industry consensus is that business class seats take up only 10% of the aircraft
space but account for 30% of total revenues. Now, strip out the costs of running
and maintaining a large 747 aircraft, remove the expense of the less-lucrative
economy class, and you have an attractive proposition.
The airline benefits from exclusively business class flight profits and
travellers are able to enjoy a luxury flight with all the frills at a
substantially lower cost than what is on offer at the mainline carriers, all of
whom have to raise business class prices to compensate for economy class
‘I teamed up with Lawrence, we finalised the numbers and looked like we had a
winning proposition,’ Bavister says. Since its inaugural flight in January 2007,
the airline has received rave reviews and massive media coverage for a small
company. It is a story that has captured the City’s imagination.
The things that have made people take notice range from ‘lie-flat’ seats to a
30 minute check-in. The airline, which flies daily between Luton and New York’s
Newark Airport, also has its very own terminal at each airport. No queues, no
crowds, just a comfortable lounge, a glass of chilled champagne and a personal
check-in at your lounge table before boarding.
The airline currently runs one return transatlantic service daily. By the end
of September a second flight on this route is scheduled and by March next year
Silverjet is planning to run another two aeroplanes on new routes that are still
to be decided.
But it hasn’t all been easy going for Silverjet. The second service to New
York was delayed by almost two months as the aircraft to be used had to be
refitted, causing the share price to dip from 152p to 131p, and the stock took a
second knock, falling to 79p when Silverjet confirmed plans that it would be
stopping operations on its holiday subsidiary Fly Jet.
Another irritation was the Treasury’s decision to hike air passenger duty for
passengers that use airlines with only one cabin class. ‘The technicality lies
in how many different classes of cabins you have, so that a carrier such as
ourselves which is only one class effectively pays one level of APD, whereas if
you are a carrier with more than one class you could be doing exactly the same
route with the same number of people flying the same aircraft, but if you have
more than one class of cabin then you pay full APD,’ Bavister explains.
The intention was that the hike would dissuade people from flying, but what
really made life difficult for Bavister was that the measure was retrospective,
which meant that people who had already booked their flights were suddenly
slapped with an extra duty that wasn’t payable when making the booking.
Silverjet opted to take on the extra charge itself, rather than go through
the embarrassing exercise of blocking passengers from boarding until they had
paid. ‘I don’t think there is any evidence to show that APD has done anything to
dissuade people from flying. It’s succeeded in raising revenue for the general
purse but I feel it has done little else,’ Bavister says.
Bavister is more focused on fundamentals underpinning the business, however,
and is sure these glitches are nothing other than temporary. Load factor, in
other words, the number of paying customers filling seats, hit 70% in July,
beyond what the management team had hoped for. The airline is delivering and the
concept is growing in popularity.
‘The revenue load has actually increased to beyond what we had expected at
IPO time. You can fill up an aircraft with people who have free tickets, but the
key is how many people on a flight are paying the full fare. The way we have
built that expectation has been exceeded in the months so far,’ Bavister says.
Preparing for takeoff
When John Bavister, the finance director of Silverjet, decided to join old
business friend Lawrence Hunt and start up a brand new business class airline
from scratch, the last place he expected to go looking for finance was the
Yet it is on AIM where Silverjet has made its home over the past 18 months,
and despite Bavister’s original hesitation to look to the Public markets for
funding, he says that AIM has turned out to be the perfect place for the
fledgling airline to raise capital.
‘Lawrence had been talking to private investors, the feeling was at that time
that the most appropriate way to finance this would be privately through high
net worth individuals. We were talking to institutions as well but it seemed
more likely that our money would come from wealthy individual investors,’
Dealing with individuals soon proved problematic, unfortunately. ‘We spoke to
hundreds of potential investors and sometimes the difficulty with those people
is that you want to put some distance between yourselves and your investors and
the management team and at times it looked like the boundaries were going to be
‘One very memorable example is that one of the potential investors said that
if I am putting all this money in then I want to choose the seats and I want a
‘You just can’t manage a business when you have investors doing that sort of
Bavister also sounded out private houses, but as Bavister points out private
equity is ‘usually quite nervous about start-ups, and they are usually quite
nervous about airlines, so if you put those two together you have actually got
The Silverjet team then considered AIM, and has never looked back.
‘Originally our expectations were that the public markets wouldn’t be the right
place to go, but as it turned out that is where we are,’ he says.
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