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Harare - Fastjet, the London listed Africa focused low cost carrier, says it will seek more investors from South Africa after Old Mutual [JSE:OML] participated in its recent $75m capital raising initiative to fund expansion into more African markets.
The money will be used to fund its ambitious expansion program in Africa. Fastjet already run budget airline operations in Tanzania and is awaiting final licence approval in Zimbabwe and Zambia and is positioning to enter the South African aviation scene in the future.
“When we raised $75m, we did come to SA and we met some potential investors and Old Mutual had invested in this round. We operate in Africa and it is natural that we talk to South African investors,” Fastjet chief executive officer, Ed Winter said by phone from London.
In Zimbabwe, the budget carrier will initially operate two aircraft and industry players say each aircraft will give the company revenue of over $30m each year. If it increases the frequency of flights, the revenue prospects will also rise significantly, depending on demand for its flights, other aviation industry officials said.
Fastjet, said Winter, is keen to operate the lucrative Harare to Victoria Falls route via Bulawayo as well as the Bulawayo and Harare to Johannesburg routes. Other regional routes the company finds interesting include linking Harare and centers in Zambia, Kenya, Namibia and Tanzania among others.
“By bringing low fares, we are able to bring more people into air travel (while) in Tanzania, around 35 percent of our passengers are first time flyers,” he said. Final licencing in Zimbabwe and Zambia is likely to be obtained by the end of this year, he added.
However, the African aviation industry is not without its hurdles and chief among them are high fuel costs. Most budget airlines have gone under after failing to bring efficiency into their operations while higher fees and taxes have also deterred potential air travellers and further stretched the revenue prospects for budget carriers.
“Operating a low fare airline in Africa has its challenges. Even though fuel prices have come down a long way, fuel in Africa is still much higher than anywhere in the world, mainly because of higher taxation, we have higher fuel costs,” says Winter.
He said most national airlines in the region were struggling because they lacked efficiency in their operations, were employing far too many people and simply did not have the right incentives to operate profitably.
He said flag carriers such as the South African Airways were heavily reliant on government bail-outs, hence there was no incentive for them to make a profit.
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“Regulatory hurdles are also deterring the industry from growth in Africa. In Europe, you can pretty much fly to any destination of your choice,” he said.
Analysts say African governments should open up the industry to new private players to increase competition which would in turn push down flying fares.
African governments are accused of shielding their state airlines from competition from new players although recent developments suggest that there is keenness to open up the skies for new players as a measure to boost tourist arrivals onto the continent.
