Business-class airline Silverjet has entered into potential takeover talks, but analysts at stockbroker Daniel Stewart believe there is little chance of a deal going through.

Silverjet was forced to admit it had been approached by a third party by the London Stock Exchange, which demanded to know why its share price had risen in recent days. The stock advanced a further 25% following the announcement.

Mike Stoddart at Daniel Stewart suggested investors should sell their shares while there is still some price strength. 'If any prospective bidder does proper due diligence on Silverjet we see a strong probability that they will decide not to bid,' said Stoddart. 'We cannot see Silverjet making profits at the current fares and if fares go up, load factors will go down. Shareholders will then be back where they started - wondering how long it will be before the company fails.'

The company raised £11.2 million in new equity and £10 million in new debt in December, to fund deposits on two new aircraft. There are has been no updated on the purchases since the fund raising. 'Rumours suggest that one aircraft is parked at Dublin and the other is going to stay with Thomson,' said Stoddart.

Silverjet made its first commercial flight in January 2007, achieved its highest ever monthly revenues in March, with more than 10,000 revenue-generating seats. Passenger numbers also grew by 23% over February despite an early Easter falling during the month, a traditionally quieter period for business travellers.

While it did not generate an operating profit and was not cash generative in March, chief executive Lawrence Hunt said the business made solid progress towards its objective of becoming profitable as quickly as possible.

Silverjet runs two daily services to Newark and started a daily flight to Dubai in November. A rival business-class carrier, Maxjet, filed for bankruptcy protection last year after it struggled to compete with the likes of British Airways and Virgin Atlantic, while also battling rising fuel costs. London to Hong Kong low-cost carrier Oasis yesterday stopped all flights and filed for administration after struggling to cope with an estimated £65 million in debt. In March, Hawaiian airline Aloha stopped operating, again blaming competition and high fuel prices.

'Oasis has become the latest airline forced into liquidation, and it will not be the last,' said analyst Stephen Furlong of Irish stockbroker Davy. 'This follows on from the collapse in the US of Skybus, Aloha and ATA, and of Maxjet which went into liquidation in November. So no European company yet, but Sliver Jet has just announced a takeover approach and Alitalia is close, together with a host of smaller players. As we have said before, Darwinian rules apply to the sector: the weaker players will have to re-structure, shrink, merge or disappear.'