John Menzies and Oman Air agree to work on handling joint venture

John Menzies has secured a pre-contract agreement towards winning a major ground handling deal with Oman Air.

Menzies Aviation and Oman Air have signed a memorandum of understanding confirming their intention to work together, which they will follow up with due diligence in order to agree a joint venture in the last quarter of 2016.

The planned joint venture would take over Oman Air's ground handling businesses at nine airports across Oman, including Oman Air's key hub operation in Muscat.

Some 2,500 people would be employed by the JV, handling over 50,000 aircraft turnarounds per annum.

While no financial details were disclosed, analysts at Shore Capital said they expected the returns to be "attractive" given Menzies handled total turnaround in 2015 of around 1.5m and that the JV also includes a key hub operation.

"This venture represents real progress against our strategy by securing a hub location and by expanding in emerging markets," said Forsyth Black, president and managing director at Menzies Aviation.

The MoU follows other recent news flow from Menzies Aviation, including extensions signed for three existing customers in Macau, on top of further work with Ryanair in Romania and this month's five year contract to handle Virgin America at Los Angeles.

"There has been a lot of management change of late at John Menzies, however today’s news as well as other recent contract wins, in our opinion, is a further sign that the management team that is now in place is beginning to deliver on the potential we have long believed existed at the group," said ShoreCap.