UNITED KINGDOM: Fastjet In Financial Trouble, Fastjet In $10m Capital Search

Low-cost African airline Fastjet could effectively go out of business if further funds are not found from its shareholders and investors.

The troubled airline set up by easyJet founder Sir Stelios Haji-Ioannou, flies in several African countries including South Africa, Tanzania and Zimbabwe but has been in financial trouble for some time and withdrew its flights from Kenya in 2016.

It lost an average of $50m a year up until 2016 and has yet to file its 2017 results, which have to be published by Friday for it to remain listed on London’s AIM exchange

The company now says that if no new funds emerge, Fastjet may not be able to continue trading as a going concern.

The result was that within hours of the announcement Fastjet lost more than two-thirds off the value of its shares in a matter of hours.

Whilst initial discussions with certain shareholders have been positive, discussions are ongoing and there can be no guarantee of a successful outcome, it warned on Wednesday.

The airline started operating in 2012 with the backing of easyJet’s founder but has continued to consume cash, and it now had just $3.3m in its reserves.

Fastjet launched in Tanzania with an ambition to become a pan-African low-cost carrier, but it has struggled throughout with problems.

Fastjet announced plans to raise new funds through a proposed capital raising to bring in $10m (£7.6m) to see off turbulence looming over its future.

The company said the funds should deliver enough working capital to keep it in the air for the rest of 2018.

The African airline said today it plans to raise $10m made up of a placing by way of an accelerated book build to raise $7m and a subscription by its largest shareholder, South African airline Solenta Aviation.

The company also plans to raise up to £1.6m by way of an open offer made to qualifying shareholders.

Shares soared on the news after nosediving earlier this week.

Solenta Aviation boss Mark Hurst will join the board of Fastjet from 2 July as a non-executive director to work with the carrier's chief executive Nico Bezuidenhout.

Bezuidenhout said: Today's capital raising will give Fastjet the adequate headroom it needs for the remainder of 2018.

Although there were some unexpected headwinds in 2017, the stabilisation plan put in place by the board has significantly reduced the cost base of the company and right-sized the business.

Trading in the year to date has been in line with market expectations and the company is now well-positioned to capitalise on future growth.

Around half of the net proceeds raised will be allocated to support the working capital requirements of Fastjet's Zimbabwe and Mozambique operations, and repayments of certain loans, with the balance then used to support operations in Tanzania and for the launch of services in South Africa.

The news came after the airline's shares slumped earlier this week on the warning that should it be unable to reach an agreement with shareholders over new funding, it could cease trading.

Today, Fastjet said there were a number of challenges over last year but it delivered a significant reduction in its underlying cost base with operating costs slashed by nearly half.

The airline reported a $25.3m group operating loss - though that was down on the year before's $65.6m total. Revenues fell from $68.5m to $46.2m for the year ended 31 December 2017.

It did noted some unexpected headwinds over the course of the year including greater than expected accumulation of restricted cash in Zimbabwe, an unforeseen engine event, and the late entry of two aircraft in Tanzania due to regulatory delays which had a financial impact of around $5m on revenue.

This month is expected to be the most challenging in terms of financial headroom for the company, with Fastjet saying the capital raising announced today should provide adequate headroom for the rest of the financial year.

Looking further ahead, it plans to look into financing and possibly joint venture options in South Africa to support its push there.


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Fastjet Appoints Sylvain Bosc New CCO

Fastjet boss Nico Bezuidenhout completed his raid on other airlines executive suits when he brought his latest recruitment, the new CCO Sylvain Bosc on board, who also previously worked at South African Airways.

The growing team of aviation specialists recruited filled the last gap this week as former South African Airways Chief Commercial Officer Sylvain Bosc joins the carrier to lead its commercial activities. He succeeds Richard Bodin who opted not to move to Johannesburg when the airline relocated its head office from Gatwick Airport.

Sylvain joins a team of industry heavyweights assembled by CEO Nico Bezuidenhout to rebuild, restructure and redevelop the business.

Sylvain's credentials include a highly successful tenure as Chief Commercial Officer at French carrier Corsair, prior to which he was engaged as Group Strategic Planner for the Air France KLM Group as well as holding several key commercial positions at Air France earlier in his career.

'Fastjet holds significant potential as a business' says Bosc before adding 'and righting the business and positioning it for inevitable growth is an absolute priority'. He then also said that the concept of a truly pan-African low-cost airline, making air travel accessible to the second most populous continent after Asia, presents a significant socio-economic and commercial opportunity.

The impact of mobile telephony on the continent has networked markets and contributed substantially to increased economic growth in Africa. The potential for aviation, and low-cost travel, is not dissimilar. 'There has been a marked stimulation of tourism and trade growth in markets where fastjet operates.

Typically, aviation fulfils a significant role in the development of these two sectors as well as empowering publics who have not had the opportunity to fly before' commented Bosc further before concluding: 'I look forward to fastjet partnering with relevant authorities, governments and private industry to further fuel growth on the continent'.

CEO Nico Bezuidenhout believes that the team he has now put in place represents the top talent in aviation with appointments reflecting the direction of the business. 'Fastjet already holds substantial market share on routes that it operates and plans are that it will become the market leader on the continent' said Nico, 'Sylvain’s appointment will go a long way to re-establish a solid and formidable commercial foundation. His experience, particularly in Africa, insight and lateral thinking will stand fastjet in good stead'.

Fastjet Negelects Nairobi And Entebbe, But To Relocate To South Africa 2017

Fastjet's new Chief Executive, Nico Bezuidenhout, would sooner or later be looking at the South African domestic market, now that key decisions are out of the way.

A relocation in early 2017 from London Gatwick to Johannesburg will take the head office of the airline into the African continent where operations actually take place, for now in Tanzania on domestic and regional routes and in Zimbabwe on one domestic route to Vic Falls and twice daily to Johannesburg.

Other decisions taken was to phase out the Airbus A319 fleet thought to be too large to operate profitably on other than high density routes and while presently only one Embraer E190 is flying for Fastjet are more expected in due course.

Information from usually reliable sources have now indicated that CEO Nico is eying the South African domestic market, where of course for the past decade before joining Fastjet he managed Mango, South African Airways' LCC.

This, if proven to be correct, would be an indicator that both Zambia and Kenya may go on the back burner though considerable work and resources have flown into getting operating licences and relevant permits to commence operations in these two countries.

Given the level of competition in South Africa in the LCC segment however, with other established players being Kulula among others, owned by Comair, a British Airways affiliate, and given that a former Fastjet Manager, one Kyle Haywood, failed to get the airline off the ground and subsequently left Fastjet, will Nico however have his work cut out for him, to consolidate on one side and push for expansion on the other into a notoriously hard fought over market as South Africa is.

If Fastjet goes ahead it will also have to review their business model which up to now saw Fastjet PLC hold 49 percent of the shares of the two companies in Tanzania and Zimbabwe, leaving the remaining 51 percent controlling interest in the hands of local investors. South Africa however has a lower threshold of just 25 percent of shares being permitted to be held by a foreign investor, something Fastjet's board no doubt will have to take a hard look at.

For now though are the few remaining flights from Dar es Salaam to Entebbe and Nairobi underway before, on 05th December, both services, alongside flights from Vic Falls to Johannesburg, will be halted until further notice.

Fastjet Airline To Show Profit Sooner Than Later

First came the news that the company headquarters will be moved from London Gatwick to Johannesburg to save cost, which according to reliable information will see some key individuals leave the airline at that time.

That was followed by a review on fleet requirements and the decision to gradually phase out the Airbus A319, in principle a perfectly good aircraft but arguably too large to profitably operate on a number of routes in Tanzania as well as regional and international routes.

A leased Embraer E190 has already joined the fleet and aviation pundits are closing monitoring when additional such smaller aircraft will join the fleet, all of course subject to regulatory approvals and amendments in operating licenses.

Now, late yesterday, was confirmation received that Fastjet in Tanzania will effective 05th of December halt flights between Dar es Salaam and Entebbe and on the same day will also halt flights between Dar es Salaam and Nairobi.

It is not clear at this time if these flights will resume when the new and more cost effective smaller aircraft have joined the Fastjet fleet, not vis a vis any timeframe for such changes nor vis a vis a principle decision on operating the routes in the future.

In Zimbabwe will, also effective 05th December, the route from Victoria Falls to Johannesburg be suspended, compelling tourist visitors from South Africa to fly either via Harare or else via Livingstone across the border in Zambia.

In a related development was Fastjet also once again hit with a birdstrike, rendering one of their aircraft in Tanzania unserviceable and leading to the cancellation of several flights. Updates on a return to full scheduled services will be available on the Fastjet

Fastjet Attracts CEO From Mango

Fastjet has announced Nico Bezuidenhout, whoo has just resigned from Mango, has been appointed as Chief Executive Officer (CEO) of the Company. London-listed Fastjet and Mango, a unit of South African Airways (SAA), are part of a wave of low-priced airlines expanding operations in Africa as they seek to capture middle-income travellers who are exhausted of unsafe road journeys but cannot afford major global carriers.

Nico Bezuidenhout, who joins Fastjet on August 1, will be filling a position that was vacant for almost three months after the previous CEO resigned due to pressure from the company’s second-largest shareholder.

During his tenure, Nico grew the airline’s market share to 25 per cent of the South African domestic air travel market and the fleet to ten Boeing 737-800 aircraft. The pan-African airline warned in March that its full-year earnings would miss expectations with low demand and cash flow. Bezuidenhout joins FastJet with high expectations as the company has ambitions to become the first low-priced pan-African airline.

“This experience, together with his detailed knowledge of the markets in which fastjet operates, will be invaluable to the Company as it seeks to capture the growth opportunities in the region”. “I am very pleased to be doing fastjet at this stage in its development”, he said. Bezuidenhout adding that while conditions were challenging, he was confident he could build on fastjet’s current operational base.

Fastjet, which operates mainly out of Tanzania at the moment, made an operating loss of $37.9-million a year ago, although this was an improvement over its loss of $43.9-million in 2014. The stock has dropped 62 percent this year. Fastjet launched flights between South Africa and Zimbabwe earlier this year. Legacy operations Fly 540 Ghana and Fly 540 Angola were shut down and route network rationalisation was begun.