Fastjet Seeks Expansion Into Internal South African Flights, Cuts Back In Kenya

Fastjet Seeks Expansion Into Internal South African Flights, Cuts Back In Kenya

London-based discount airline Fastjet is seeking another injection of capital and trying to stabilize its business by cutting unprofitable routes and adding internal South African flights — a  crowded market but one it said it can’t ignore.

Traded on the London Stock Exchange, the airline wants to be the first pan-African low-cost carrier, but has not made a profit since its inception in 2012.

Fastjet last raised funds with a $19.5 million share offering in the summer, Aviation Week reported.

The airline is moving its headquarters from London to Johannesburg and is downsizing aircraft in an effort to save up to 15 percent in operating costs.

Additional costs associated with the stabilization plan, especially with returning leased aircraft, “has placed greater strain on available cash resources,” Fastjet said, according to Aviation Week.

While Fastjet operates flights between Johannesburg, Tanzania and Zimbabwe, it has no internal services in South Africa. The South African market is too big to big to ignore, said Nico Bezuidenhout, the new Fastjet CEO, Bloomberg reported.

Bezuidenhout is starting to identify growth opportunities after starting a fleet overhaul and cutting weaker routes to reduce losses at Fastjet. He anticipates Fastjet will break even from the fourth-quarter of 2017.

It’s hard to imagine how, Aviation Week reported, in a story with the headline, “Fastjet Nears The Finish Line”:

Grasping for positives amid the mess, Bezuidenhout … re-stated his confidence in “the tremendous market opportunity there is for a truly pan-African LCC.”

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Bezuidenhout knows the South African market. He budget airline Mango for 10 years and had headed parent South African Airways.

“The South African aviation market is reasonably overtraded,” Bezuidenhout said. “When one enters this market you have to do it carefully and in a considered and measured manner. So we are working on developing that plan.”

Citing low passenger demand, Fastjet will suspend flights Monday between Dar es Salaam and ­Entebbe, and between Victoria Falls in Zimbabwe and Johannesburg, Business Daily reported.

Fastjet launched daily flights from Dar es Salaam and Kilimanjaro to Nairobi in January
at lower prices than the competition — Kenya Airways and its associate, Precision Air.

Service frequency between Harare, Zimbabwe and Johannesburg has been increased. The route network will now include domestic Tanzanian routes between Dar es Salaam and Mwanza, Kilimanjaro, Mbeya and Zanzibar.

International routes will be between Tanzania and Johannesburg, Lusaka and Harare as well as two routes from Harare to Victoria Falls and Johannesburg.

Fastjet and Kenya Airways have been battling for passengers on some of the Kenya-Tanzania routes, leading to a price war, Business Daily reported. The Kenya Civil Aviation Authority told the two airlines not to run ads that hid extra costs in an effort to get more customers.

Fastjet in April 2015 raised Sh7.5 billion to fund its penetration of the African market, money it said it intended to use to fund its expansion into markets including Rwanda, DRC and South Sudan.

Management turnover

Fastjet is is planning a new capital raising effort sooner than expected in the first quarter of 2017, prompting the resignation of Fastjet Chairman Colin Child, Flight Global reported.

“Having led the fund raising exercise in July this year, Colin believes that it would not be appropriate for him to continue in this role given the company is initiating, sooner than originally expected, a further fund raising exercise,” Fastjet said in a trading update.

Bezuidenhout will assume the role of interim chairman pending the appointment of a new non-executive chairman, Fastjet said.

Fastjet shareholder Stelios Haji-Ioannou was a vocal critic of Child and urged fellow shareholders to get rid of him as chairman at a June 28 Fastjet general meeting, Flight Global reported.

Child was acting CEO between March and June after Ed Winter left, before stepping aside after Bezuidenhout came on board.