Statement re contract

Sutton Harbour Holdings PLC
24 July 2003


Sutton Harbour Holdings plc

Sutton Harbour has completed a review of the options open to the Company
following the announcement by British Airways of their proposed cessation of
services run out of Plymouth City Airport after 26th October 2003.  Sutton
Harbour has today written to its shareholders with its proposals to take over
the London Gatwick slots and commence the service, which the Company believes to
be in the best interests of shareholders.

A copy of the Company's letter to shareholders is set out below.

Enquiries:

Duncan Godefroy            Managing Director                       01752 204186
Nigel Godefroy             Finance Director                        01752 204186
Barrie Newton              Rowan Dartington & Co Ltd               0117 9330011
Jason Clark                Deborah Clark & Associates              01872 276276

23rd July 2003


Dear Shareholder,

The Future of Plymouth City Airport

I am writing to explain the opportunity that has presented itself following
British Airways' announcement that it is to cease operating all services from
Plymouth City Airport after 25th October 2003. As British Airways is currently
the largest user of the Airport, this decision has profound implications for its
future commercial viability.

Background

We acquired Plymouth City Airport Limited from British Airways and negotiated a
new 150 year lease from Plymouth City Council in April 2000.  In its first two
years in our ownership, our airport business contributed £754,000 to group
operating profits.   During these years we successfully established additional
flights to Cork and Dublin with British Airways and identified a number of
potentially attractive routes which we were actively marketing to various
airlines that used suitable aircraft.   Prospects for the airport looked
encouraging and we had every reason to be pleased with our acquisition.  Then
came the terrorist tragedy of 11th September 2001.

It soon became clear that the repercussions of that ghastly event would be
considerable, particularly on the airline industry.   British Airways began to
take steps to cut costs, faced as it was with sharp declines in passenger
numbers on many of its routes.  Paradoxically, passenger numbers from Plymouth
and Newquay held up better than many, but that was not enough to prevent BA from
reducing services in the second half of our second year as airport owners and
managers.  Unfortunately, further terrorist activities in other parts of the
world, the threat of war in Iraq (subsequently a reality) and most recently the
impact on the travelling public of the SARS outbreak have all eroded passenger
numbers and virtually all airlines have been seeking to cut costs drastically.
British Airways has been no exception and its various retrenchment plans have
seen a steady reduction in services from Plymouth.

The load factor on the London Gatwick route has been consistently high over
recent years, but with its reduced activity in the South West, British Airways
now considers it will be unattractive to continue to operate these services.
With Malcolm Naylor, a qualified Accountant and ex-Managing Director of Brymon
Airways (the company that used to own Plymouth City Airport and which operated
the routes in question before it was taken over by British Airways in 1992) we 
had a series of meetings with the Managing Director of British Airways 
CitiExpress and his senior managers. These meetings led to us securing a period 
of exclusivity relating to the Plymouth-Newquay- Gatwick services.

Transfer of Slots to Air Southwest

As a result of these discussions, we have now agreed Heads of Terms with British
Airways CitiExpress to provide the framework required to transfer the Gatwick
slots to Air Southwest (a subsidiary of Sutton Harbour Holdings plc).  After two
years of operation we will acquire 'grandfather rights' over these valuable
landing slots at Gatwick.    British Airways has also advised that it is
prepared to make certain of its resources, including pilots, available to us for
a relatively short period during the start up phase.

Our head office and main operations base will be at Plymouth and, as a
consequence, our costs will be significantly lower than those of British Airways
CitiExpress, which has head office overheads reflecting the much higher costs of
running a global airline. In addition, we have been able to secure two leased
aircraft for an initial two year period on advantageous terms.  Our investment
in this new business is expected to amount to less than £1.25m, which we plan to
finance from the Company's own resources. On this basis, we anticipate a fair
return on a load factor of approximately 60%, which is below that currently
being experienced by British Airways CitiExpress.  Shareholders should note,
however, that the profitability of the airline will be seasonal and that, in the
current financial year, the airline will only contribute during the weaker
winter period.

In addition to the direct benefits from the assumption of these routes, we will
also be helping to protect our investment in Plymouth City Airport by securing
existing revenues. In future, we will also have much greater control over the
combined operation and we will be much less vulnerable to changes in strategy by
users of the airport. We have also conducted extensive research into potential
additional routes and it is hoped that these will be added in future.

We are very conscious that the airline industry generally is in poor shape and
that to start a new airline at this time might seem to involve undue risks.
Why do we think we can succeed when so many are finding things so difficult in
the industry?  First, we are taking on established routes with which, as
operator of Plymouth City Airport, we are very familiar.  Second, Plymouth and
Newquay are sufficiently distant from London to make the journey by air
attractive in terms of time compared with land based travel.  Demand for the
flights to Gatwick from both Newquay and Plymouth has remained relatively strong
throughout the downturn of the past year and despite the recently introduced
Ryanair service between Stansted and Newquay.   Third, we have recruited an
experienced team headed by Malcolm Naylor.  Fourth, our head office and main
operations base will be at Plymouth and, as a consequence, our costs will be
significantly lower than those of British Airways CitiExpress. Fifth, physical
restrictions at Plymouth

City Airport make it unlikely to attract low cost operators as they rely upon
larger aircraft than the airport can accommodate. Because of all these factors,
your board believes this is a lower risk project than would normally be the case
with a new airline operation.

We have thoroughly considered the alternative courses of closing the Airport or
identifying an alternative carrier. In our view, neither presents as attractive
a proposition for your company as operating the existing routes ourselves.
Additionally the closure of the airport would be negative for Plymouth and the
local economy.

Underpinning our investments in the airline and the airport will be in the value
of the Gatwick slots and the land at Plymouth City Airport - the slots have an
intrinsic value and we are entitled to share in the redevelopment of the airport
site.

Finally, the operation of the airline should not in any way be confused with our
suggestion that, in the longer term, a new airport be built to serve Plymouth
and its hinterland.   We made this suggestion following the publication of the
Government's RASCO report that outlines the future of the aviation industry over
the next 30 years.   That report suggested that Plymouth City Airport was secure
in the short to medium term, but in the longer term was likely to close because
of its physical limitations.  We felt that a city the size of Plymouth should
have an airport close by and, therefore, put forward a plan of how that might be
achieved.  Our initiative has certainly provoked a lively debate.

It is our intention to alter the format of the next Annual General Meeting, on
this occasion, to allow a full discussion about the future of Plymouth City
Airport and any other matters shareholders would like to ask questions about.
I will first give a brief indication of how the current year has started.  We
will then take the formal business of the AGM, and we then will have a question
and answer session.

I very much hope that as many shareholders as possible will attend the AGM on
Tuesday 29th July at The Plymouth Hoe Moat House starting at 12 noon.  I look
forward to seeing you.

Yours sincerely

ELLEN WINSER
Chairman






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