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Cash Strapped Fastjet Says To Raise Funds By End Of July

Cash Strapped Fastjet Says To Raise Funds By End Of July

African budget airline Fastjet has announced that it need to raise new funds to provide essential working capital and make necessary changes to its business, as its operation continue to struggle from negative cash flow in a challenging aviation market on the continent.

The airline, which raised $75 million last year for expansion, aims to complete the fundraising by the end of July, The Guardian reported.

“Although the ongoing cost reduction programme and the recent reduction in routes and fleet size are yielding material benefits the Group continues to be cash flow negative,” Fastjet said in a statement released ahead of its annual general meeting.

“Accordingly, the Company needs to raise further finance to provide essential working capital and also to effect the necessary changes to its operations, reduce costs further and pursue revenue generating initiatives to grow the business. The Group has therefore commenced the initial phases of a fund raising exercise which it plans to complete during July 2016.”

Shares in the London-listed low-cost carrier, which has seen the departure of two top executives under pressure from its second-largest investor, lost nearly a quarter of its value in Tuesday’s trading, Reuters reported.

The airline said passenger number on international flights had remained lower than expected, but domestic routes within Tanzania, its main market, was showing sign of recovery.

I forecast that it will about 390,000 passengers for the first six month of 2016, up from 363,726 passengers in the same period last year, but said the load factors had dropped to 47 percent from 70 percent in 2015.

It also operates in South Africa, Zimbabwe, Zambia, Uganda, Malawi and Kenya.

Fastjet, which has been in operation since November 2012, has been expanding both its in-country flights and international routes and plans to build a fleet of up to 34 aircraft plying over 40 destination across Eastern and Southern Africa.

In February, EasyJet founder and a major shareholder in Fastjet, demanded that the airline’s CEO and a member of its board of directors be fired for running up the cost of running the airline and leaving it cash strapped.