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Fastjet bullish despite African headwinds

Sep 28 2015 15:43
Memory Mataranyika

Harare - Africa-focused budget airline Fastjet is looking beyond the region’s current economic slowdown and currency problems as it forges ahead with setting up an inter-regional aviation company.

This would ultimately link up major cities such as Johannesburg, Harare, Lusaka, Nairobi and Lagos. The company is already awaiting final licensing in Zimbabwe, where it will launch domestic routes to destinations such as Harare to Victoria Falls and Bulawayo. If it satisfies authorities on these routes, it will start flights to other African cities - a step in the right direction for CEO Ed Winter, whose dream is to set up an integrated African airline.

“It gets even more exciting for the company after the Zimbabwe and Zambia operations get final licensing, which we expect in the next month. The plan is to then fly to Johannesburg and other cities in Africa such as Nairobi, Tanzania and Lagos in Nigeria,” said an official involved with the company.

However, current economic developments across Africa are heavily staked against Fastjet, with economic troubles in Zimbabwe and Zambia its major threats. Fastjet is still making a loss, with first-half losses amounting to $9m, an improvement from last year’s $14m, according to company executives.

“Whilst we have seen these very significant improvements, African currencies have lost considerable value against the US dollar, which combined with a worldwide reduction in commodity prices, has caused an economic downturn in both Tanzania and Zambia. Accordingly the Board has downgraded its forecast for full-year 2015 but is confident of meeting its expectations for 2016,“ Winter said on Monday.

Fastjet is banking on a different approach to grow its revenues, especially at a time when investors have been patient with the company with a capital-raising initiative which provided a $75m boost earlier this year. It has been able to increase flights from Tanzania to Malawi, taking the competition to the national airline in Malawi, which has also been forced to slash airfares, Fin24 was told.

“Innovation is key to us and we are always seeking to understand the local markets. And therein lies our growth potential,” said the official. Various initiatives, such as allowing passengers to increase the weight limit and allowing Tanzanian visitors to ferry fish in specialised luggage, have boosted passenger volumes by a massive 56% to 363 769.

Winter is looking beyond the company's current financial performance, which saw operating losses decline to $12.8m from last year’s $19.8m. It closed the half-year period to June with a net cash position of $70.0m against $17.9m for last year.

Fastjet said the $75m equity fund raised had significantly broadened the company's institutional shareholder base. It is also seeking a share capital reorganisation to consolidate "ordinary shares on the basis of one new share of £1 each for every 100 shares of 1p each”.


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