Fastjet falters

by Martin J Cowling 2 Comments

Africa is a continent crying out for a decent transportation network. The railway systems are largely fragmented and crumbling. The top nine airlines in Africa carry fewer passengers a year than Delta alone does in two months. Trade, tourism and travel are all hampered by an inadequate infrastructure.Invalid request error occurred.
Enter fastJet with the vision of  a series of low cost airlines throughout Africa all using A319s, all sharing  brand, marketing and infrastructure.
With a pedigree as impressive as Easyjet‘s  Sir Stelios Haji-Ioannou, a chunk of cash and the backing of Lonrho PLcwho already invest in 18 African countries and had a successful private airline operation already. How could the venture fail?fastJet  launched services on 29-Nov-2012 with  flights on  domestic routes in Tanzania  utilising three A319s. The situation since then has been fraught with fastjet :
  • finding getting permission to fly internationally from Tanzania has  been anything but fast
  •  losing 56 million US dollars in the last 18  months
  • being engaged in legal battles over ownership and shares
  • losing its chairman David Lenigas who resigned this week amid claims his style was too combatative
  • facing having its aircraft repossessed by Canadian leasing firm Avmax in February over unpaid bills
  •  receiving a $US3 million tax claim from the Tanzanian government
  • having its auditors KPMG in May warn that there is “significant doubt” that the group can continue to trade as a going concern.
The Board of fastjet have stated that “the outlook presents significant challenges” It claims, however,  that its Tanzanian operations are enjoying high load factors and are covering the operating costs of their leased A319 .  They state that the carrier is on track to have 15 planes by the end of the year. Passengers are paying an average of $70 per flight and 40 per cent of them are purchasing an ancillary service. 38% of passengers were first time flyers.

The airline expects to get its international traffic rights by August, and has signed agreements with European tour operator Tui to carry its passengers. They have also signed an agreement with Emirates to connect with the airline’s flights to and from Dubai.

a bird with a yellow backgroundThe airline is desperate to expand into South Africa. To do so, it entered into an option agreement to buy the entire issued share capital of 1time Airline which collapsed last year. This failed so the airline switched to a joint venture with  South African investment company Blockbuster which was renamed Fastjet Holdings. It owns 75% of the South African operation in compliance with domestic airline ownership laws with fastjet itself  holding the remaining 25%. Local charter operator Federal Air will operate the fastjet services using a wet leased 737-300 while the airline obtains  regulatory approval to introduce A319s. South African domestic service is anticipated to start in July 2013 with  services between Johannesburg and Cape Town.

Fastjet Holdings is associated with Edward Zuma, the eldest son of South African President Jacob Zuma and as a result has come under heavy criticism by South African media for a lack of transparency in the deal.

Being able to fly under the fastjet brand in Kenya has taken much longer than was planned. Initially fastjet bought a stake in Kenyan airline Five Forty Aviation Ltd, which trades as Fly540. This deal collapsed in a legal war. With that deal in trouble, in January, 2013 Fastjet agreed to work together with suspended Kenyan airline Jetlink express to bring Fastjet to Kenya. Jetlink stopped flying because of cash flow problems last year. That deal has now been scuttled because in April, 2013, fastjet and Fly540 settled. Now fastjet are considering selling parts of Fly540.

FastJet’s chief executive Ed Winter is now taking over as chairman on an interim basis. He thanked Mr Lenigas for his “significant contribution”.

There appears to be so much work needed simultaneously in so many places (Tanzania, South Africa and Kenya simultaneously), that one wonders if Fastjet will lose the race against time to be profitable. Will fastjet fly or will it join the many relics of airlines that litter the airports of Africa?

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